General Overview

COBRA was enacted in 1985 to provide access to affordable health insurance when an employee loses a job, is laid off, retires, or when a person receiving health coverage under a spouse’s plan divorces or is widowed. The employer must permit “qualified beneficiaries” to elect to continue their health insurance under the plan for 18, 29 or 36 months, depending on the “qualifying event”. The employee may not be required to pay more than 102% of the plan’s cost. Notices are required when the employee dies, is terminated, has a reduction in hours that causes a loss of benefits, divorces, is entitled to Medicare coverage, has a child that ceases to meet the insurance eligibility requirements, fails to return from FMLA, or is disabled. In addition notices are required for newly eligible employees to explain their rights under COBRA.

Who has to comply?

• Any employer who employs more than 20 employees on a “typical business day” – The 20 employee rule includes part-time employees who can be added together to create a full time employee equivalent.
• Churches are exempt
• State and Federal Governments are exempt

What are the penalties for
non-compliance?

The excise tax is $100 per day per qualified beneficiary for the duration of the noncompliance period, with a maximum of $200 per day per family, regardless of the number of qualified beneficiaries.

Some courts have held that the employers are liable for insurance claims for the COBRA eligible participants when notices and elections for coverage were not made on a timely basis.

Services

COBRA notices are very time-sensitive and the potential risks to an employer are high if the notices are not given. The W&A COBRA program provides the employer with the ability to meet its obligations under the law. W&A not only provides the initial required notices, but the various qualifying event notices. Terminated COBRA participants are tracked and their COBRA payments are collected and sent to the employer.

Compliance

As the COBRA laws are changed your assigned administrator will notify you of the changes and make sure you stay up to date with the changes.

Consulting

As part of the routine services provided by W&A, a consultant is available to help with questions concerning tax law changes, and plan administration. The consultant is also available for consultation on qualifying events and other compliance issues.

Contact us for more information on how we can help you with COBRA issues.