Sep 4, 2021
If employers do not comply with COBRA regulations, they might get punished both on federal and state levels. The price of noncompliance might be quite steep, from tax and statutory COBRA penalties (which can cost up to $100-110 per day respectively) to the lawsuit expenses. It goes without saying that noncompliance with the Consolidated Omnibus Budget Reconciliation Act incurs not only financial losses but also negatively impacts the reputation of a company. That's why it is crucial for every employer to keep track of COBRA norms and use them properly during and after the employment period of a covered employee
There are plenty of scenarios of COBRA violations and this article overviews the main of them. They include but are not limited to a failure to offer COBRA, failure to notify on time about coverage or ensure continuation coverage, and failure to adhere to the new regulations.
One of the frequent issues with compliance with COBRA regulations is not providing benefits for a qualified beneficiary according to a group health plan. The qualified beneficiaries can be employees and eligible dependents. In general, employers with 20 or more employees must provide COBRA benefits to their employees and the suitable dependents. However, in certain states like Arizona, Texas, and Illinois even employers with 1 employee are required to offer specific perks according to their group health plans and may be subject to this law.
Some employers violate COBRA regulations as they don't continue their group health plans and health insurance after a qualifying event for covered employees (continuation coverage issue). These qualifying events are not limited only to the termination of employment but also refer to the next situations:
Another case of potential legal issue is failure to give a notification about COBRA coverage on time to eligible employees and the dependents. In general, election notices should be issued to a covered employee and a dependent within a 14-day term after a qualifying event. The election notices should contain legally-correct language and descriptions of the period, dates, and amounts. It is quite easy to violate the Consolidated Omnibus Budget Reconciliation Act by providing a misleading date or premium amount. Therefore, all the data in a COBRA election notice should be verified as the inaccuracies there can cause a gap in COBRA coverage for employees and their dependents or issues with continuation coverage for them.
Last but not least, failure to comply with the recent version of the law can also entail financial and legal consequences. Being enacted in 1985, Consolidated Omnibus Budget Reconciliation Act impacts the way in which employers must regulate benefits continuation.
Recent alterations to COBRA were provoked by the Covid-19 crisis. For instance, the Department of Labor and the IRS had temporarily prolonged the election period for participation. In May 2020, they decided that the period to elect COBRA should be prolonged from 60 days to at least 60 days more next to that. Some more extensions to the law were introduced in February 2021 by the Department of Labor.
The IRS can also excise tax in certain situations. The maximum tax which the IRS can excise is lesser of 10% of the costs paid previous year by an employer for group health plans or $ 500,000. The IRS might also charge tax of $ 100 per day per person or $ 200 per day per family.
This underlines the necessity to always keep a pulse on the newest updates to adapt the coverage and ensure continuation coverage accordingly in order to avoid the amends.
If a covered employee or dependent thinks that their rights were disregarded when it comes to COBRA, they can appeal to the US Department of Labor to file a complaint. As this legislation functions on a federal level, the US government ensures and monitors conformity of the organizations and companies with it.
If reported for infraction, an employer will be thoroughly inspected and the corresponding measures, including COBRA penalties and legal issues, might be taken.
Even though not all employers have COBRA coverage, those of them with 20+ employees must lend benefits to the eligible personnel and other qualified people. This notice should be given during 44 days following a qualifying event.
If an employer does not make an election notice during this period, it can become a subject to COBRA violation penalties of up to $100 per day per violation. In addition, the employer would have to pay for the medical expenses of the eligible COBRA beneficiaries. When unsent or sent too late notice results in a lawsuit, the employer might be also forced to pay the fees of the lawyers and attorneys as well as other damages.
If a company is reported for its non-adherence to COBRA regulations, it will be a subject to the audits. Failing to comply with COBRA involves fines and can also lead to lawsuits costs of which will also be invoiced to a non-compliant employer.
Potential COBRA fines are quite intimidating. However, they can be avoided thanks to the responsible approach to COBRA compliance. A great idea might be contacting a third-party administrator or a competent COBRA advisor which will facilitate handling and administration related to COBRA compliance.
Even though COBRA regulations are quite convoluted and time-bound, it is much easier to manage them with a well-planned system of deadlines which ensures creation of precise and timely COBRA notices. Such an approach is represented by an automated COBRA administration which allows firms to send accurate and punctual notices as well as keep track of the recent regulations. That's why don't waste time on time-consuming COBRA management tasks and opt for the smart solution to automate this routine.