Erin Barry
What is COBRA?
The Consolidated Omnibus Budget Reconciliation Act, more commonly known as COBRA, ensures that employers offer continuation of health coverage to eligible employees. This act helps prevent a lapse in coverage for employees when employment or life circumstances change. All employers with 20 employees or more are required to be in compliance with COBRA. When an employee experiences a qualifying event, they are eligible to coverage under COBRA.
Qualifying Events include:
-Termination of employee (except in cases of gross misconduct)
-Reduction in hours of employment
-Death of covered employee
-Divorce or legal separation of covered employee and spouse
-Employee becoming entitled to Medicare
-Child losing dependent status
An employee will have 60 days after employer benefits end to enroll in COBRA. Typically, an employee can be covered under COBRA for an 18-month period; however, depending on circumstances, coverage may be extended up to 36 months after enrollment.
Regulations Under COBRA:
The employee and certain members of their family may be entitled to COBRA coverage in the case of a qualified event. Those eligible for COBRA coverage under an employee are identified as Qualified Beneficiaries. Qualified Beneficiaries can include the covered employee, the employee’s spouse, and children dependent on the employee’s plan.
Under COBRA, employees will be responsible for paying the full premium of their coverage in addition to a 2% administrative fee. As a person qualifies under COBRA, cost is a key consideration that should be evaluated in the decision to enroll. Additionally, if an employee is covered by multiple plans, they may be eligible for COBRA coverage from each plan.
Employer Responsibilities & Deadlines:
Employers are responsible for notifying their employees of COBRA coverage within 30 days of the employee experiencing a qualifying event. Failure to comply with COBRA can lead to costly penalties for your company, so it is best to stay on top of compliance strategies ahead of time. To ensure compliance, we recommend keeping detailed records of eligible employees, COBRA coverage, and employee notice dates.
Within the COBRA notice, employers should include information about the employee’s COBRA rights, election period to enroll, and details about premium costs for coverage. Providing these details in your employee’s COBRA notice will help set them up for success during the enrollment period.
Key deadlines to consider include the following:
- Employers must provide COBRA notices within 30 days of a qualifying event.
- Employees have 60 days from the qualifying event to elect COBRA coverage.
- Premium payments are typically due on a monthly basis, but this may differ by plan.
Best Practices for Staying Compliant:
We have put together a few tips for you and your business to help direct you towards compliance. It is crucial to submit the required COBRA reporting to the IRS and Department of Labor to ensure compliance. Developing a written COBRA plan is paramount to your business’ success. Be sure to outline your company’s policies and procedures for administrating COBRA coverage and have this plan on file when it is needed. After developing the COBRA plan, conduct regular reviews on it to keep information up to date and accurate as your business grows. Periodic reviews can be conducted by the business owner, executive team, or HR department, whoever typically handles COBRA processes for your business.
It can be useful to implement COBRA administration software to help manage tasks regarding compliance. Additionally, seeking professional advice could make it easier to meet compliance standards. Either meeting with an attorney or HR professional will help provide information for staying in compliance with COBRA. Hiring or appointing a plan administrator may help streamline the process of COBRA compliance and keep all information organized under one person.
Our final suggestion is to educate your employees on COBRA before they are eligible for coverage. Holding bi-annual seminars on COBRA procedures and frequently asked questions can help grow your business’ knowledge on the subject. If employees are aware of their responsibilities and rights under COBRA beforehand, the process could be smoother once they become eligible for benefits.
Our team at Dominion Payroll is here to assist your payroll, HR, and COBRA compliance needs. Having our own COBRA administration service, our trained specialists can handle your COBRA needs for you!