COBRA Employer Responsibilities and Penalties - Health insurance is one of the most important benefits that employers can provide for their employees. Employers that sponsor group health plans enable their employees and their families to take care of their essential medical needs, ensuring that they can devote their energies to productive work. Because of the critical importance of good health, employer-sponsored group health insurance programs benefit employees, employers, and society as a whole.
Most group health plans sponsored by employers must comply with
the Employee Retirement Income Security Act of 1974 (ERISA), a
Federal law that sets standards to protect employee benefits. One of the protections contained in ERISA is the right to COBRA
continuation coverage, a temporary continuation of group health
coverage that would otherwise be lost due to life events like
termination of employment, death of an employee, and divorce.
Notify employees and covered spouses of their COBRA Rights when they first become covered under the employer's health plan(s).
Notify employees and/or covered dependents, within 14 days of the COBRA Qualifying Event date, of their ability to elect COBRA continuation of coverage and provide election forms.
Maintain records to prove notifications were sent within their specified timeframes.
Track COBRA election periods and length of coverage.
Invoice COBRA premium payments and balance bill short payments.
Maintain payment records and correspondence.
Notify COBRA continuants of benefit changes and any open enrollment periods.
Allow COBRA continuants the ability to add dependents, increase coverage, or change plans as "similarly situated" active employees are allowed to do.
Notify active COBRA continuants of their conversion rights, if any, within 180 days of their projected COBRA coverage termination date.
Notify COBRA continuants when their COBRA coverage has terminated.
Maintain written procedures for COBRA administration.
Cobra: Employer Penalties
Penalties for non-compliance with COBRA can result in
IRS excise tax penalty of $100 per day for each violation. This fine can be increased to $200 for each day in which there was more than one Qualified Beneficiary per family.
An ERISA penalty of $110 per day payable to each Qualified Beneficiary for each day the employer was not in compliance.
The employer can be held liable for payment of legal fees, court costs and even for medical claims incurred by a Qualified Beneficiary.