Stay Compliant with the Law by Getting COBRA Administration Assistance from the Professionals
As an employer, you required to comply with all types of rules, laws, and regulations, one of which being the COBRA law of 1985. COBRA is important to comply with because breaching it can result in significant penalties for your business. As most businesses are subject to COBRA, it’s important to know what COBRA means for your company.
What is COBRA and Why Does the Government Enforce It?
In 1986, the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 was enacted, requiring employers who had 20 or more employees and group health coverage to provide the option for employees to extend their health coverage if they lost it in the face of certain events.
COBRA amends the Employee Retirement Income Security Act, the Internal Revenue Code, and the Public Health Service Act. It acts to ensure that employees have the option to continue their group health insurance plan from their group health providers in a temporary capacity for themselves, their spouses, and their dependent children. Essentially, COBRA protects employees and their families from immediate health coverage loss when terminated for any reason or following a qualifying event that we define later in this article.
COBRA is Mandatory for Most Businesses. Discover Your Company’s Responsibilities Under COBRA.
Many businesses are subject to COBRA. If you offer group health plans and you have more than 20 employees that worked for more than 50 percent of your typical business days in the previous year, you are subject to the law. Full-time and part-time employees count toward the 20 employees. Part-time employees count as fractions of full-time employees depending on the number of hours worked. To determine if your company should have COBRA in place, contact an ESS expert to avoid any penalties for non-compliance.
Whether the offered health coverage is from a private sector or it is maintained by the state or local government, you are generally subject to the law. Exceptions from COBRA include health coverage sponsored by a church organization or by the federal government.
- Notifying eligible employees of their option to choose COBRA when a qualifying event occurs
- Notifying your group health plan administrator of the employees’ and other individuals’ eligibility within 90 days of the qualifying event
- Notification to all employees and individuals about COBRA benefits
- Providing identical coverage to employees and individuals who elect to receive COBRA coverage
- Keeping proper record of all notices and procedures
COBRA Goes into Effect Only When Qualifying Events Occur. What Are the Qualifying COBRA Events?
Qualifying events are simply the reasons why an employee would lose their health coverage and must be offered the extended coverage. Qualifying events determine who the coverage must be offered to and the minimum amount of time it must be offered.
Qualifying Events for employees include:
- Termination for any reason other than gross misconduct
- Reduction of employment hours
Qualifying Events for the spouse or dependents of an employee include:
- Termination of an employee for any reason other than gross misconduct
- Reduction of employment hours
- Entitlement to Medicare
- Divorce or legal separation from covered employee
- Death of the employee
- Loss of dependent child status under the plan rules
COBRA Defines Coverage Length. How Long Must You Offer Coverage?
COBRA has set time lengths of minimum coverage for each type of qualifying event. For example, termination of employment requires a minimum of 18 months of continued coverage. Generally speaking, continued coverage falls into either 18-month or 36-month extensions. However, a plan may extend longer than the maximum required time outlined in the law.
While you must offer continuation of coverage, the coverage is often significantly more expensive for the previously employed individual as you most likely will not continue your contribution to the coverage.
What Are the Penalties for Non-compliance?
If you violate COBRA requirements, you can be subject to hefty fines and penalties. As COBRA is enforced not only by the Internal Revenue Service, but also the U.S. Department of Labor, and the Department of Health and Human Services, you may face the following penalties:
- Excise tax penalties of $100 per day or $200 per day if more than one individual is affected
- Under the ERISA Act, a fine of $110 a day for delinquent notices
- Lawsuits from employees who did not receive COBRA notices
- Payment of accrued attorney fees, monetary damages, medical expenses, and interest from eligible employees
Get Compliant with ESS
Like the many other regulations and laws you need to keep track of, COBRA is important to maintain as an employer and business owner. Notifications, procedures, and proper record keeping of COBRA law is important to avoid penalties from the government. To simplify your business and to stay compliant with COBRA and many other business laws and regulations, call Employer Support Services today. Our experts help in your company’s COBRA administration and ensure your compliance at all times.