Compliance March 17, 2004

Court Says Release Not a COBRA Notice

March 17, 2004 (PLANSPONSOR.com)—A federal court in New York ruled that a company owed an employee who became a qualified beneficiary a formal COBRA notice within the specified time period, despite the fact that the qualified beneficiary had signed an employment release that provided employer-paid COBRA coverage for a certain period.
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In the case Knoll v. Equinox Fitness Clubs , a qualified beneficiary asked the court to reconsider a previous decision, and the court decided against the decision and reinstated the COBRA notice claim.    The court said that because the release did not include information, such as the premium amount, required in a COBRA notice, the release cannot be used in that way.  

TheNew York  court also said that the responsibility to provide a COBRA notice comes from the qualifying event, and therefore, whether or not COBRA coverage is received by a qualified beneficiary does not change the need for an employer to provide COBRA notices.    The court also cited the late notification, more than five months after employment termination, to the employee as another reason that the form was not a proper COBRA notice.

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The employer claimed that since the qualified beneficiary was already enrolled in COBRA coverage before the employer was legally required to notify her of her COBRA rights through the signed release, the company did not need to provider her with a COBRA notice.   The company also maintained that the release was, in fact, a COBRA notice and claimed that, when the qualified beneficiary received an Election of Continued Coverage form, she also received an appropriate COBRA notice.

In an earlier court decision, the federal district court maintained that the employment release given to the qualified beneficiary was valid and ruled that the qualified beneficiary could not overturn it.   Additionally, the court dismissed the claim that the employer had not provided a COBRA election notice to the beneficiary.   In these proceedings, the qualified beneficiary had challenged the validity of an agreement she signed with the company in which she released all employment-related claims against her former employer, so long as the employer provided payment for the first six months of her COBRA coverage.

The court did not review its decision on the fraudulent inducement claim or on an argument regarding the timing of the COBRA election notice, and also declined to address an affirmative misrepresentation claim.

Investing March 16, 2004

Fed Funds Rate Remains at 1%

March 16, 2004 (PLANSPONSOR.com) - Once again the Federal Reserve has decided against changing interest rates from their decade-old lows.
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The Federal Open Market Committee (FOMC) opted to leave the federal funds rate target exactly where it was at the last reading – 1%, according to the FOMC’s end-of-meeeting statement.

In their accompanying comments, the Fed officials spoke to the economy as a whole in their decision.   Commented FOMC members:   “The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity.”   Overall, the committee sees the upside and downside risks as “roughly equal.”  

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Returning to talks of inflation that have dominated the FOMC’s statements as of late, the committee sees little chance for an “unwelcome fall in inflation” and thus “the Committee believes that it can be patient in removing its policy accommodation.”

Interest rate policy is important for plan sponsors because many plans’ loan interest rates are tied to the Prime Rate.

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