As federal law, the Consolidated Omnibus Budget Reconciliation Act (COBRA) is something many organizations simply must handle; therefore, COBRA compliance may present a serious risk of exposure. Despite this knowledge, among the employers required to offer COBRA, many remain out of compliance.

The increasing number of COBRA lawsuits is staggering, and businesses that cannot ensure adherence to regulations are paying for it with exorbitant fines and settlements. In one court case, an employer was ordered to pay nearly $120,000 for its failure to comply.

Discover the COBRA administration processes you and your employer can implement to limit your COBRA exposure.

How does COBRA noncompliance harm businesses?

Employers with 20 or more workers may receive penalties under the tax code, Employee Retirement Income Security Act (ERISA) and the Public Health Service Act.

For example, those who fail to properly offer or notify employees about COBRA can receive a nondeductible excise tax from the IRS of $100 per day, per violation. Plus, this tax increases to $200 per day if the violation affects more than one qualified beneficiary in the family.

The ERISA penalty, on the other hand, is $110 per day — and per violation — for every qualified beneficiary within the family. Unlike the IRS excise tax, ERISA doesn’t maintain any maximum daily limit for its penalties.

In this case, if a family has four qualified beneficiaries an employer doesn’t notify of COBRA coverage, a judge could effectively fine the employer up to $640 a day between IRS taxes and ERISA penalties.

How does the right HR tech boost COBRA compliance?

At the end of the day, COBRA compliance — and the need to ensure — falls on employers. By using the right COBRA administration software to simplify navigating the law, companies benefit from:

• automated notifications for qualifying events
• automatic updates for new and updated legislation
• improved insight and reporting capability
• a checklist for action items related to coverage
• a truly single system of record

Above all, employers gain valuable peace of mind knowing they have tools to adequately track and communicate with COBRA participants regardless of the business’s size.

To learn more, download the How Your COBRA Administration May Leave You Exposed white paper.

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