When an employee retires or their position is terminated, it may seem as though your obligations to them as an employer have ended. However, the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) was established to make it possible for former employees to hold on to their health care coverage for a limited time after the end of their employment. Essentially, this means that employers are required to offer continuing group health coverage at group rates to employees who are facing the loss of coverage.
Is Your Company in Compliance with COBRA?
Managing COBRA regulations can be challenging, and the administrative work can be confusing and tedious, but compliance with COBRA is critical. Outsourcing COBRA administration simplifies what can be a complicated navigation of a federal regulation.
COBRA lawsuits can and do occur, and one of the most common reasons for these cases is allegations of companies giving improper notice. Lack of compliance (or even lack of proof of compliance) could make your company liable to incur ERISA fines, which can compound into a staggering number. Additional costs could include IRS excise taxes, legal fees, and retroactive claim payments.
Your responsibilities under COBRA start by issuing the initial notification about COBRA to the employees in question and their dependents. It is also necessary to deliver qualifying event-related COBRA notifications or extensions; collection and premium payments; ongoing billing for the COBRA period of eligibility; and the tracking of COBRA completion dates.
Your Company's Basic COBRA Requirements
Companies that employ 20 or more employees are typically required to offer COBRA coverage. These companies are also obligated to notify employees that COBRA coverage is available. Plans maintained by private-sector employees fall under the umbrella of COBRA.
The coverage offered to beneficiaries under COBRA must be identical to the coverage they had before leaving their position and applying for continuation coverage. The cost of COBRA to a company comes in the form of the administrative nature of complying with this act; otherwise, former employees typically pay for their COBRA coverage and the premium can be high.
Medical flexible spending accounts (FSA) are also included in COBRA and, upon leaving a company, employees and their dependents are considered qualified beneficiaries. Former employees' choices for continuing medical FSA coverage during the COBRA eligibility period often depends on how much was contributed to the FSA. Electing not to continue with an FSA under COBRA means an employee would forfeit their contributions to date.
Rely on a COBRA Authority
Meeting the requirements of COBRA is not easy. What is easy is falling out of compliance with the COBRA requirements. While it would be logical to assign the duties of COBRA compliance to an administrative member of your staff, a far more effective and less taxing choice is to outsource COBRA compliance and remove the onus from your in-house staff.
Federal regulations change regularly. Staying up to date on these shifts and acclimating to them is a heavy responsibility for the uninitiated or unfamiliar. Anyone who is less than an expert in COBRA compliance means your company is leaving itself open to being out of compliance and at the mercy of expensive taxes and fees.
Relying on a COBRA authority means your company has a representative on their side who has up-to-the-minute knowledge of changes to COBRA or requirements of COBRA compliance. Work with a COBRA expert who has the knowledge to ensure that your company complies with COBRA in all instances, no matter the details surrounding an employee's departure from your company.
Contact The Benefits Group today to discuss outsourcing COBRA compliance responsibilities to an expert. Connect with a preferred vendor who will manage COBRA compliance for you and minimize the risks of fees and taxes.