COBRA Compliance: What you need to know
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What is COBRA?
Consolidated Omnibus Budget Reconciliation Act - COBRA is a law that provides health insurance coverage for qualified employees, and their eligible dependents, who have lost coverage due to a qualifying event. Such events include:
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Employment termination
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Resignation
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Reduced hours
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Divorce
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Death
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Other loss of eligibility
An employee has a right to continue
insurance coverage under their former
employer's group health plan for up to 18 months, as long as the former
employee (participant) pays for the cost of this coverage. If the
employee's spouse and dependents were covered during the employment
period, their coverage is also extended at 102 percent of the cost of the
premium that includes the total of both the employer and employee premium.
COBRA regulations generally apply to all group health plans, such as medical, dental and vision plans, that are sponsored by private sector employers with 20 or more employees.
Employers are responsible for ensuring that employees are properly notified of their COBRA rights and qualifying events. Reasonable procedures for electing to continue insurance coverage must be established and communicated to employees.
Is your business compliant?
COBRA regulations are complex. They are difficult to interpret and are constantly changing. As a result, many companies fall out of compliance with COBRA regulations, which can be a costly mistake.
The IRS charges noncompliant employers
an excise tax of $100 per day, per qualified beneficiary -- up to a
maximum of $500,000. ERISA penalty fines for noncompliance cost plan
administrators an additional $110 per day per event. In addition to these
fines, employers may be required to pay for medical claims not covered by
insurance, as well as for litigation fees.
Companies can unknowingly make simple mistakes.
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Are you sure your organization is completely compliant with the most recent legislation?
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If brought into question, can you prove that your organization followed all required steps?
Consider these questions:
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Were your COBRA policies, procedures and materials developed with the aid of an ERISA attorney?
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Do you provide written notification of COBRA rights to each newly covered employee and each spouse?
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Is your staff trained to answer questions from attorneys that challenge your position?
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Are you sure that all COBRA notices, letters and forms are properly worded with the most current Department of Labor (DOL) and COBRA regulations?
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If you were to refuse an untimely election or payment, could you prove that it was late?
If you answered no to any of these questions, your organization could have a problem. Of course, compliance is very complex and there are many aspects of COBRA regulations to consider.
Is there an easier way to ensure compliance? Yes!
Extensis is the leading New Jersey based Professional Employer Organization. We assist our clients in overcoming potential administrative hurdles to their success. Compliance with ever changing employment regulations is just one of the solutions we provide our clients.
Our years of experience and expertise is key in providing our clients a clear path around the many hurdles on their path to success. If you would like to know more, let us know.
For more information, go to www.extensisgroup.com, or call 888-473-6398.