Common COBRA Violations to Avoid

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.

Common COBRA Violations

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 to Do So

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

Failure to Provide 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.

The Effect of COVID on COBRA

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.

How a Payroll and HR Provider Can Help with COBRA

Having EBC HR & Payroll Solutions, Inc. on your team allows you to move forward with confidence, knowing that we’re doing right by your employees, doing right by you, and it’s all being done in accordance with all the latest rules, regulations, and laws.  Human resources are a vital aspect of any organization and we know that HR personnel can become inundated by laws and regulations as they work to establish HR and Safety policies and procedures. EBC is dedicated to offering solutions for your organization’s human resources challenges. Our philosophy is to provide a comprehensive, wide range of services to all our clients.

To learn more about how EBC HCM is already helping plenty of employers manage COBRA compliance, contact us today.