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What does non-compliance with C.O.B.R.A truly cost? Here's a breakdown:
A: There are several areas that COBRA penalties can be detrimental to employers from hefty IRS fines, to court (civil lawsuits) to muddied reputation. Here are a few examples of penalties for non-compliance:
IRS Excise Tax Penalties
The IRS can levy an excise tax penalty of $100/day per
compliance violation Per dium fines for a single COBRA violation that went unnoticed can certainly add up quickly. If the IRS does levy an excise tax on the employer, the minimum is the greater of $2,500 for each beneficiary affected by the rule violation or $100 per day during the employer’s period of non-compliance.
On top of the aforementioned hefty IRS fines, the U.S. Department of Labor also has jurisdiction over Federal COBRA. This means ERISA can impose statutory penalties of $110 per day per compliance violation.
Civil lawsuits can be brought by plan participants and employees when employers fail to meet their fiduciary responsibilities and this can result in a variety of monetary damages paid by the employer.
Your Company Reputation
Employers also have their company reputation to consider when dealing with substantial COBRA mistakes and/or compliance issues. A small oversight can lead to a monumental lawsuit, not just with COBRA but with regards to other compliance areas such as HIPAA, and ERISA requirements, resulting in the wrong kind of attention for your business.
Employers can take steps to avoid the aforementioned penalties altogether by ensuring that they are following the Federal COBRA, HIPAA, ERISA, etc regulations. Good record keeping and professional conduct are a must with respect to how your human resource department handles such matters. Many third party administrators handle the administrative burden of these laws so that the employer does not have to. However, even with outsourced services, there have been cases where utimately, the employer was still responsible. Knowledge is power; ensure your HR department, TPAs, and brokers are handling your compliance matters thoroughly and up to standard of the law.
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