If you have at least 20 employees, you will most likely need to send out a COBRA notification at some point. COBRA is a legal act that was signed into law by President Ronald Reagan in 1985. The goal of the act was to provide employees with group health benefits if they lost coverage for reasons other than gross misconduct.
In practice, this means there are seven common situations where COBRA might apply. While the employee can get coverage if they are laid off or quit, they can also use COBRA if they switch from full-time to part-time status. Likewise, spouses and dependents can get coverage if the employee dies or there’s a divorce.
The 9 Most Common COBRA Mistakes
Because you only have to use COBRA in specific situations, it’s easy to forget about this legal requirement. However, penalties for not following COBRA can quickly snowball. Penalties can add up to $100 per day per qualified beneficiary, so making a COBRA mistake can be costly. To protect your company legally and financially, avoid the following pitfalls.
1. Providing Verbal Notices
Failing to provide a written notice is one of the most common COBRA mistakes. For instance, the employer may have discussed ongoing coverage with the worker on the day the worker quit. While the employer may feel like they don’t have to send anything, this is not the case. According to the law, a COBRA notification must still be sent through the mail.
2. Failing to Send COBRA Notices on Time
This is another common mistake. After you learn about a qualifying event, you have 30 days to alert the plan administrator. Once this happens, the administrator has 14 days to notify the employee about their coverage.
You also have to give employees a general COBRA notice when they are first hired. In this case, you have 90 days to give employees an initial notice that details how COBRA works if they experience a qualifying event in the future.
3. Forgetting Dependents
Dependents, like the employee’s children and spouse, are also eligible under COBRA. They can typically receive up to 36 months of coverage instead of the normal 18. Your employee’s dependents may get coverage in the following circumstances.
Divorce or Separation: If the employee gets divorced or separated, their spouse and dependents can keep their coverage for up to 36 months.
Death: After a worker dies, their spouse and dependents can continue receiving their group health plans.
Coming of Age: Normally, a dependent stops receiving their parent’s health coverage when they turn 26. If the child effectively ages out of health coverage, they can use COBRA to continue the same plan for up to 36 months.
4. Not Providing COBRA With Every Eligible Plan
COBRA is required for group health plans. While most employers will remember that this means health insurance is covered under COBRA, there are other types of plans you must include as well. Vision, dental, pharmacy, and some subscription plans must be offered under COBRA. If your company offers wellness plans, they also must notify employees about their COBRA eligibility.
5. Emailing COBRA Notices
You can’t email your COBRA notices. By law, these notices must be sent through US mail. Email and verbal notifications don’t count.
6. Forgetting to Count Part-Time Employees Toward Your Employee Total
Employers must follow COBRA rules if they have at least 20 employees for 50% of the prior year. Your full-time workers count as one employee. Meanwhile, your part-timers each count as half an employee.
If you have 20 or more employees, you must follow COBRA. Even if your employee count drops beneath 20 during the current year, you are required to use COBRA if you employed 20 people or more during your previous year.
7. Not Noticing a Qualifying Event
As an employer, you aren’t always privy to the inner workings of your employees’ lives. You’ll easily notice if an employee quits or gets fired. For other qualifying events, you or the plan administrator will need to pay attention to employees who stop or change their coverage for reasons like a divorce or a child reaching age 26. Then, the employee must be notified of their COBRA rights.
8. Forgetting to Provide the COBRA Notice to New Employees
When you hire new workers, you are required to give them a general COBRA notice. This tells them about their COBRA rights if their employment status changes in the future. The Department of Labor (DOL) has a COBRA example notice you can use to make sure your company is in compliance.
9. Failing to Document Your COBRA Compliance
You aren’t legally required to provide any documentation under COBRA. However, it’s a good idea to document your compliance. If there’s an employee complaint or you’re audited by the DOL, being able to show you sent COBRA notifications is important.
Avoid Common COBRA Mistakes by Working With a Payroll Provider
If you want to demonstrate your COBRA compliance, a payroll provider can help. At Asure, we handle the COBRA initial notice, installation of COBRA-eligible plans, qualifying event notifications, and more. You don’t have to spend your time learning about the ins and outs of COBRA rules and regulations.
To learn more about COBRA and how to grow your business, contact one of our small business HR and payroll experts today.