Common COBRA Mistakes, Admin Errors, and How to Avoid Them

Binders full of COBRA paperwork

COBRA legislation is multifaceted, and its complexity can cause a headache for just about any employer. The constantly changing rules and regulations make compliance more challenging than ever—and failure to comply can lead to IRS excise tax penalties, ERISA penalties, and civil penalties.

In order to avoid costly penalties and liabilities, it’s important to know the errors employers often make regarding COBRA.

Failing to Realize COBRA Applies to You

Many employers make the mistake of assuming COBRA does not apply to their business. It's actually required for any group health plan maintained by companies with 20 or more employees. That threshold includes both full-time and part-time employees, and a part-time employee counts as a fraction of a full-time employee.

Assuming it Doesn’t Apply to Your Plan

Once you determine whether COBRA applies to your company, it’s important to understand which types of plans are subject to it and which are not. HRA’s and FSA’s are generally covered in full under COBRA, as well as employer-maintained prescription drug plans, wellness programs that provide relief for health issues, and disease-specific policies that provide medical care.


However, many health plans may not be subject to COBRA, including those that provide only life insurance or disability benefits. Many states have mini-COBRA laws that need to be considered as well, so check with the state insurance commissioner’s office to determine whether they exist in your state.


It’s important to also consider that when a health plan is terminated, COBRA obligations may not automatically end as well.


Not Offering COBRA When Required

Once you know who is entitled to COBRA and what plans are subject to it, you need to determine what is considered a “qualifying event” and who the qualifying beneficiaries are. The event needs to cause a loss of plan coverage, and just because a situation is considered a "triggering event" under COBRA, that doesn't mean it will cause a loss of coverage.


To avoid the type of ramifications this type of error can cause, try using an automated COBRA solution. 


Not Providing Information to the Beneficiaries

It’s important to be aware of what constitutes a qualifying event and to give proper notice to the employee. But it’s also important to provide participants and beneficiaries with adequate information at other times. Some required COBRA notices are the general and election notices, notice of unavailability and notice of early termination. Clarity COBRA’s web-based software offers automated notifications and 24/7 access, eliminating any guesswork.


As an employer, you should also require employees to notify the plan administrator of any changes in family status, such as a divorce or change of address, so you can continue to provide them with the proper information.


Charging the Wrong Premium

The employer’s plan document and election notice have to address COBRA premiums. There is no regulatory guidance, and it’s easy to calculate the premium incorrectly which can become problematic and even require the help of legal counsel in some cases. Clarity provides services for billing and collection each month, which can help prevent any premiums-related errors.


In order to avoid being held liable for COBRA violations, your HR department should be familiar with its provisions. Retaining an employment lawyer can also help keep your team updated on COBRA changes, and advise whether business insurance will cover employee errors in fulfilling COBRA requirements.


Using a benefits software with built-in processes to keep your company compliant is one of the most important things you can do to avoid making these types of errors. Streamline communication, stay updated on COBRA’s complex regulations, and automate compliance with the help of Clarity COBRA administration.