Administering benefits in accordance with the Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers to generate and keep track of several employee notices and deadlines, making it a compliance minefield for many. In addition to the federal requirements, you also need to comply with applicable “mini-COBRA” laws in the states where you operate.
Given the complex ins and outs of COBRA compliance, mistakes can occur, especially if you rely on manual processes or have trouble keeping pace with time-sensitive COBRA deadlines. Even if they are unintentional, COBRA violations can be costly. The Department of Labor can assess fines of $110 per day for each qualified beneficiary who did not receive coverage when they should have. The IRS can also levy tax penalties for non-compliance. On top of that, your organization can be open to lawsuits in the event of serious violations. Therefore, to keep your organization in healthy compliance, make sure you can identify and avoid the following COBRA violations:
Not offering COBRA when required
Employers with 20 or more employees are required to offer COBRA benefits to covered employees and their dependents who become eligible. In some states, such as Arizona, Illinois, and Texas, employers with as little as one employee must offer COBRA to eligible participants. As a result, failure to offer COBRA when required could lead to non-compliance penalties on the federal and state level.
You can also commit COBRA violations by not offering benefits continuation following a qualifying event. Keep in mind that not all qualifying events are directly related to an employee’s loss of employment. Other COBRA qualifying events that trigger eligibility for COBRA benefits include the following:
- Divorce or legal separation
- Dissolution of a domestic partnership or civil union
- A dependent becomes ineligible as a dependent under the terms of the plan
- A covered employee becomes eligible for Medicare
Not providing timely and accurate COBRA coverage notifications
One of the key COBRA requirements for employers is providing eligible employees and their dependents with a COBRA notice within the required timeframe. COBRA election notices must go to affected employees within 14 days of a qualifying event, and they must contain legally-required language and descriptions. The Department of Labor provides Model COBRA notices to guide you, and your benefits broker or advisor can also generate notice forms on your behalf.
In addition to sending the election notice on time, you also need to ensure the dates and amounts described in it are accurate. You can easily commit a COBRA violation by misstating due dates or premium amounts, ultimately causing an employee or their dependents to experience a gap in coverage.
Not complying with new COBRA legislation
Since COBRA was enacted in 1985, legislative changes through the years have affected how employers must administer benefits continuation. Recent changes triggered by the COVID-19 pandemic provide an excellent example of the importance of staying on top of new legislation. In May of 2020, the Department of Labor and the IRS temporarily extended the timeframe employees had to elect participation in COBRA and other benefit plans. Where employees typically have 60 days to decide whether to elect COBRA coverage, the new rule extended that time for at least another 60 days. In February 2021, the Department of Labor added another extension for certain circumstances.
Most recently, the American Rescue Plan Act (ARPA) has made COBRA more affordable for employers to accommodate the millions of individuals who lost their jobs during the pandemic. It provides a 100 percent subsidy of COBRA premiums from April through September 2021. Not only do you need to incorporate this new legislation into your existing practices to avoid COBRA violation penalties, but you also need to communicate the new provisions to eligible past employees.
Avoid COBRA violation penalties
Though COBRA administration comes with many time-bound employer requirements, they are easier to manage when you have a reliable process for tracking key deadlines and generating accurate COBRA notifications. In addition to helping you send timely notices to eligible employees and their dependents upon a qualifying event, an automated COBRA management solution also has built-in rules to help you stay in compliance with evolving federal and state COBRA laws.
Instead of getting lost in piles of COBRA documents, you can boil the process down to just a couple of clicks!
Contact us to learn more about how you can avoid COBRA violations.