COBRA Employee Count – How to Stay Compliant to Avoid Penalties

We all know that employers under 20 employees are not subject to COBRA compliance.  Counting employees, however, is not that straightforward.  Let’s examine what goes into the count.

Employer Support Services can ensure your company is compliant and take the stress out of the COBRA employee count with our professional COBRA administration services. Contact us today, and we will take care of your COBRA administration requirements.

[Related: COBRA Continuation Coverage Guide for Employers]

 

Count All Employees for COBRA Compliance

First, COBRA requires that all employees be counted.  It does not only include employees eligible for benefits.  Included will be part-time employees and employees that may be in a class or group that is not eligible for benefits.  It will include employees that are part of a union as well as employees that are non-resident aliens without U.S. source income.

 

How to Count Employees for COBRA Compliance

Now that you understand how the COBRA employee count works, you can start counting the different classifications of the employees at your business.

Fluctuations

Employee counts can go up and down, sometimes by one or two and sometimes more significantly for seasonal businesses.  Employers are subject to COBRA when they have 20 or more employees on more than 50% of their typical business days of the previous calendar year.

Part-time

Part-time employees are counted as a fraction of an employee based on the average hours worked as a proportion of the minimum number of hours required to be full-time.  For most companies, that is 30 hours.  Therefore, an employee working 15 hours per week is ½ of an employee for COBRA purposes.

Common-Law Employees

Employees do not include partners in a partnership, self-employed individuals, independent contractors, or directors unless they are also W-2 employees.

Read more about independent contractor status:

[Related: How to Classify Your Employees]

Related Companies or Controlled Group

While determining related entities can have its own complications, in general, the count should include employees of commonly owned companies, parent companies, and subsidiaries.  It should also include foreign entities that fit into one of these categories.

Employees Outside the United States

Employees in any of the following cities or territories are also entitled to COBRA rights.

• The District of Columbia
• Puerto Rico
• U.S. Virgin Islands
• American Samoa
• Guam
• Wake Island
• The Panama Canal Zone

Contact ESS Today for Professional COBRA Administration Services

While non-compliance penalties have the potential to be costly, the real risk is when failure to offer continuation results in a qualified beneficiary with significant medical bills determining they should have access to insurance continuation.  That determination could be made long after the qualified beneficiary (employee, dependent, spouse, ex-spouse, etc.) has no relationship with the employee or the company.  It is imperative that employers know where they stand with regard to COBRA compliance requirements.  ESS can help.  Contact us at 225-364-3006, [email protected], or learn more at www.employersupport.com.