Wells Fargo Sued Over Allegedly ‘Deficient’ COBRA Notices

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Wells Fargo & Company faces a proposed class action that claims the bank has attempted to discourage former health plan participants from electing to continue their coverage by including in its COBRA notices “threatening” warnings regarding possible civil or criminal penalties.

The 20-page lawsuit states that certain health plan sponsors, such as Wells Fargo, must provide adequate notice to plan participants who lose coverage as the result of a “qualifying event,” such as termination, of their right to continue their insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). According to the suit, Wells Fargo has violated this statute by failing to write its COBRA notices “in a manner calculated to be understood by the average plan participant.”

The lawsuit alleges Wells Fargo’s COBRA notice “attempts to scare individuals away from electing COBRA” by suggesting that the submission of even “incomplete” information may result in civil or criminal penalties, and that an individual’s failure to provide an accurate tax identification number could result in a $50 penalty from the IRS.

“This information is thrown into Defendant’s notice without context, much less with an explanation of why potential criminal penalties, or IRS penalties, are somehow relevant to the COBRA election process,” the complaint alleges, arguing that this information has the effect of deterring people from enrolling in COBRA benefits.

The lawsuit points out that the U.S. Department of Labor has issued a model COBRA notice that “adequately provides” all of the required information and a “near-foolproof” way for someone to sign up for continued healthcare coverage.

Instead of using the model notice, however, Wells Fargo sent to COBRA-eligible individuals a notice that failed to include “critical information” required by law and “needlessly” threatened them with penalties and fines, the suit alleges.

More specifically, the case says Wells Fargo’s notice stated that any person who provides “materially false, incomplete, or misleading information is considered to have committed an act to defraud or deceive the Plan Sponsors,” and could be subject to “criminal or civil penalties.” Moreover, the notice references a “$50 penalty from the IRS” if the individual fails to provide an accurate tax identification number for each covered person, the suit relays.

The lawsuit argues that threats of penalties and fines “simply have no place in a COBRA election notice” and have the effect of intimidating people into choosing not to elect for COBRA coverage.

The case further claims that Wells Fargo has failed to properly identify the plan administrator as required under COBRA and instead only identifies the COBRA administrator, BenefitConnect.

The plaintiffs, former Wells Fargo employees who were participants in the company’s health plan before being terminated or resigning from their positions, claim that they lost health insurance coverage as a result of the bank’s failure to provide compliant COBRA notices.

The plaintiffs seek to represent all participants and beneficiaries in Wells Fargo’s health plan who were sent a COBRA notice by the defendant in the same form sent to the plaintiffs during the applicable statute of limitations period as a result of a qualifying event, as determined by Wells Fargo, and who did not elect COBRA.

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