Common COBRA Mistakes
Everyone makes mistakes—but some mistakes are simply too costly to make. Tax penalties of $100 per day per employee up to half a million dollars is nothing to sneeze at.
Neither are ERISA penalties or DOL lawsuits. How can an organization incur such liabilities? Through compliance violations when it comes to administering COBRA.
Once the requirements for COBRA are understood, it could seem straight forward to administer. But there are common, expensive blunders that are made that HR professionals should keep in mind.
What are some of the most common mistakes?
Not offering COBRA to an eligible person when they become COBRA eligible
Group health plans are required to offer continuation of coverage to qualified beneficiaries when a qualifying event occurs. The specific definition of what makes up a qualified beneficiary is provided by the Department of Labor and includes the employee, their spouse or former spouse and their children.
Qualifying events are those events in a person’s life that cause them to lose their group health coverage. For covered employees and their spouses and children, it includes their termination (except for gross misconduct) or reduction in their work hours.
Spouses and children become eligible when covered employees become entitled to Medicare, get divorced or legally separated or they die. Dependent children can be eligible until age 26.
Failure to provide COBRA notices
Qualified beneficiaries are to receive notices indicating their COBRA rights. And not just any notices – but ones that contain specific information as required by the Department of Labor.
Some of these include the Notice of Unavailability of Continuation Coverage and the Notice of Early Termination of COBRA Coverage. It’s a best practice to submit the notices with some sort of proof that it was delivered to cover your back.
Failure to provide enough coverage
The law stipulates that the continuation coverage must be identical to the coverage that is currently available under the plan to similarly situated individuals who are covered under the plan and not receiving continuation coverage.
In other words, you cannot decide to provide lesser coverage for qualifying individuals to save money. They are legally entitled to the same rights as others under the plan.
Over or under-charging
COBRA participants pay the full price of coverage where typically employee premiums are subsidized by their employer. You can collect the full amount and even 102% of the premium to cover administrative costs. For disability extensions, you can even charge 150% of the premium.
Be careful though! You must calculate these amounts properly if your plan is self-funded which can involve estimates not typically found in more typical group plans.
Be sure to properly communicate the amounts as well. Fixing these types of mistakes can not only be cumbersome but can enter you into non-compliance territory.
EPAY’s COBRA benefits administration services can save you major headaches. We manage all aspects of COBRA administration and work closely with you to ensure seamless implementation and ongoing compliance. Get started with a demo today.