Statistics show more employers are finding out the hard way....
If you’re reading this, you are most likely aware that offering continuation coverage under COBRA isn’t a voluntary benefit that employers can either chose to participate in or not. The requirement is a federally mandated law applicable to all employers who employed 20 or more employees for at least 50% of the previous year.
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.
In the past courts have been tentative to endorse COBRA class action lawsuits on the basis that proving a COBRA violation was thought to involve explicit, fact-specific issues that ought to be regulated by the Department of Labor and the IRS (the two departments responsible for interpreting and enforcing the provisions of COBRA). However in recent years the courts have been more willing to hear cases stemming from an array of complex COBRA compliance issues.
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.
Yet as damaging as those fines may be, they are often trivial in comparison to common class action lawsuits....
If you have any concerns that your current COBRA administration procedures might not be up to standard, we strongly encourage you to contact us at CobraHelp to see what we can do to help you prevent the formerly mentioned, costly outcomes. We also have a COBRA compliance checklist to help you get started. Here at CobraHelp, not only do we have the best rates and customer service in our industry, but we pride ourselves on being the COBRA gurus that offer simple, affordable ways to potentially save you thousands to millions of dollars in fees and litigation. (Trust us, we’ve been doing this for over 30 years, it’s kind of our thing.)
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