"Rule" Out COBRA Liabilities

The Consolidated Omnibus Budget Reconciliation Act of 1986, commonly known as COBRA, ensures that coverage is available to employees and qualified beneficiaries who lose Group Health Insurance. Employers with 20 employees or more that sponsor a group plan must give qualified beneficiaries the opportunity to continue health coverage at their own cost for 18 months or more, given a “qualifying event,” which would otherwise prevent them from having coverage. A qualifying event may include employment changes, divorce or separation, child ceasing to be a dependent, leave of absence, eligibility for Medicare, termination, resignation, court order, entrance into the military and other causes.

While most HR managers would agree that COBRA provides individuals and their families with much needed coverage during a time when they may most need it… they would also acknowledge that managing the required paperwork and timing of announcements surrounding COBRA can be a nightmare. To manage it, HR manager must identify qualifying events that occur for all employees, flag each event, trigger a notice or action to comply for each and set up reminders for ensuing notices that must follow for every step in the COBRA management process.

Sticky Notes, Spreadsheets, Alarms… Oh My!

From the Initial Notice, to the Election Notice, to the form for COBRA coverage, HR managers must ensure that they provide the right paperwork to employees and dependents during the right time frame via a “good faith manner that is reasonably calculated to ensure actual receipt of the material.”

Add on top of that changing legislation. Last year, new laws set minimum standards for the content and timing of COBRA notices-expanding information in the Initial Notice to include an explanation of the importance of keeping the plan, setting requirements and procedures for qualified beneficiaries providing notice of a second qualifying event, and a statement that the
Notice does not fully describe continuation of coverage and rights, amongst others – to ensure consistency in communication prior to individuals entering a plan. For many HR managers, managing it all means maintaining a morass of sticky notice, spreadsheets and calendar alarms… which may not always be reliable.

It is not surprising then that many companies outsource COBRA administration altogether.

Both the Department of Labor (DOL) and the IRS can assess tax penalties for COBRA violations for employers who fail to properly implement federally mandated procedures. Each of these organizations has authorization to independently assess penalties and follow their own rules for setting amounts, depending on the type, duration and willfulness of the violation. Companies may be fined an excise tax of $100 per affected employee for each day that the violation continues, and plan administrators who fail to provide required COBRA notices to employees may be personally liable for a civil penalty of up to $100 a day for each day, or more, if the notice is not provided.

In conclusion, managing COBRA can be a complicated, detailed-oriented process for HR managers and their companies; it can be easy, yet very dangerous, to overlook important information and requirements. Having a trusted partner to help HR mangers makes sense of it all and who can also provide the services to help them succeed, can make all the difference in helping companies to protect themselves and ensure a smooth process overall.

Babb, Inc. can help!