Under COBRA laws, employers are required to offer continued health coverage to employees and former employees under certain circumstances. It sounds simple enough, but in reality, there are many requirements to keep straight, including various notices, minimum lengths of coverage and plan option changes. When it comes to COBRA administration, even a seemingly small mistake can cost you big time.
So, how much will you pay for a little mishap?
Excise tax penalties come in at $100 per day, and that figure goes up to $200 per day when multiple family members are affected. Statutory penalties under the Employee Retirement Income Security Act (ERISA) can go up to $110 per day. This doesn’t even include civil law fees and attorney fees.
It adds up quickly, especially when multiple employees are involved. In Gilbert vs. SunTrust Banks, Inc., for example, SunTrust Bank agreed to a $290,000 settlement over COBRA violations.
Mistakes you’ll never make again …
To avoid the fees and lawsuits, you need to avoid making mistakes. Unfortunately, many employers and third party administrators make the same mistakes over and over.
For example, notices have to be sent out on time. For COBRA General Notices, this is within 90 days of coverage eligibility, but for COBRA Election Notices, it’s within 14 days of receiving notice of a qualifying event. If the notice is delayed for whatever reason, it could be a COBRA violation.
Sending the notices on time isn’t enough, either. Those notices need to include the right information. And you’re not just sending notices out to employees and former employees. You also need to make sure that spouses and dependents are notified properly. Otherwise, you’re looking at another possible COBRA violation.
When open enrollment season comes along, you may be so busy that you forget about COBRA participants, but that’s another mistake. COBRA participants get the same benefit options as active employees, which means they must be included in open enrollment. Once again, failure to comply means you could be dealing with a COBRA violation.
These are only a few of the most common mistakes. To be sure you’re not making any of them, you’ll want to familiarize yourself with all of them. Download the Top 12 COBRA Mistakes That Could Cost You.