Statistics show more employers are finding out the hard way....
With that being said, as with most laws, there can be severe consequences for failure to abide by the guidelines set forth by Consolidated Omnibus Budget Reconciliation Act. The most notable and common non-compliance infraction is the failure to provide the COBRA Notice in a timely fashion. An employer or Plan Administrator could be fined an Internal Revenue Code excise taxes penalty of $100 per day, per failed notice ($200/day if the failure affects more than one qualified beneficiary for the same qualifying event). On top of that they could also face ERISA (Employee Retirement Income Security Act) statutory penalties of up to $110 per day. Needless to say, those fines can accumulate into a large sum rather quickly, especially if there’s multiple notices that haven’t been sent out in time. Many employers and insurance agents are well aware of these potential damages, yet non-compliance issues were on the rise in 2015 according to the experts.
Yet, as damaging as those fines can be, they can appear trivial in comparison to a class action lawsuit.
For a list of just some of the noteworthy COBRA class action lawsuits that have been filed in federal courts, click here. As that article points out, the average cost to defend a COBRA dispute is $50,000, so even if you win, untimely you still lose. Another important take away from that article is it does a great job at highlighting the various ways a company or Plan Administrator could be liable for non-compliance. Whereas most employers tend to only worry about the content and dispersion of the COBRA Notice itself, the reality is COBRA is one of the most intricate and perplexing labor laws in this country and it’s important that companies insure they aren’t liable for any of the copious potential COBRA violations.