COBRA compliance is a complex process in which many businesses struggle. Many companies are intimidated by the intensive manuals and the strict timelines that come with COBRA compliance. The most effective tool while proceeding with COBRA compliance is knowledge and understanding of the process. In this post, we wanted to lay out the ground rules and basics for COBRA compliance. But, of course, you can streamline the process by contacting us for a COBRA administration consultation that would take care of everything for you!
If you are an employer that holds over 20 employees, federal law requires, and some states as well, that you continue medical care coverage to employees that have separated from the company. There are however a number of things that must be considered to determine who is eligible and what they are to receive exactly.
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, which was enacted in 1985. According to the act, coverage must be continued for 18-36 months for those eligible and depending on the circumstances of the change in employment.
The last thing that you want to see is an invoice charged by the IRS for $110 per day. The worst part is, that the fee is per each qualified beneficiary who did not receive coverage. COBRA penalties can be extensive, that’s why it’s imperative to stay in compliance! Keep in mind that potential penalties do not include the possibility of a lawsuit and legal representation.
If the IRS also learns that non-compliance continued after their notice, the minimum tax levied is $2,500. That’s why it’s preferable to have experts guide you on the subject, such as the team here at PF Compass!
Number of Employees
When counting how many employees an organization employs, part-time employees must also be factored into the equation. Each part-time employee must be considered as a fraction of a full-time employee. You must also factor in the number of hours they work as well. This means that a mix of part-time and full-time employees could very well equate to you having to offer COBRA.
Take precautions into noting that some states have COBRA similar laws that may enforce the same regulations for organizations with fewer than 20 employees. You can check by contacting your state’s labor agency to be sure of any specifics.
Who is eligible under COBRA?
- An employee, their spouse, and their children
- Retired employees may be entitled to COBRA.
- Independent contractors that were provided group health plans
- Employees that have seen a decrease in work hours and that led to the loss of health insurance may cause COBRA.
- In an event of an employee death or divorce, their beneficiaries are usually eligible.
Those that are usually not eligible are:
- Employees that have been terminated due to gross misconduct, such as assault.
- Employees that are eligible for Medicare.
A COBRA compliance checklist is usually helpful for HR departments and employers. Thankfully, PF Compass works with ThinkHR to make sure you have access to an online compliance database and live support. Usually, you can find these must do obligations on a checklist.
- A general notice of COBRA coverage that describes the general employee obligations and COBRA rights must be sent within the first 90 days. This must be sent to all beneficiaries. The notice must include the name of the plan, a general description, an explanation of what the beneficiaries must do to notify the plan during qualifying events or disabilities, and an explanation of keeping the general administrator informed of any changes.
- A notice of termination must be sent to beneficiaries as soon as the coverage is or will be early terminated.
- A notice of unavailability if an event is reported but is not eligible for COBRA.
- An election notice must be delivered within 14 to 44 days of being notified of a qualifying event.
- If the plan administrator is the employee eligible for COBRA, an employer’s notice of qualifying event must be sent out by the employer.
PF Compass makes it easy for your organization to follow COBRA’s strict and complex rules. Our administrative services can address any number of qualified plans, employees, carriers, and different coverage and rates!
Communication materials cover a wide range of mandated notices. In addition, reminders are sent to participants and qualified beneficiaries regarding their account status and new elections/termination information. Also, don’t forget about ongoing e-news and COBRA regulation changes!