6 Common COBRA Mistakes Made by Employers

Posted on Monday, April 01, 2019

COBRA can be a tricky field — even for experienced Human Resources professionals. There's a lot of work involved in compliance, making it critical to follow the right steps when it comes to plan communication and separation of employees.

Here are some of the most common mistakes employers make regarding COBRA continuation health care benefits.

1. Trying to Do it Yourself

Yes, employers may initially save some money by keeping their COBRA administration in-house rather than hiring a qualified expert via a third-party vendor. In fact, some larger companies hire full-time employees dedicated solely to COBRA administration and related matters. But, if you can't do so, it's often cheaper in the long run to outsource these functions. Why? Because the penalties for noncompliance are costly and can add up quickly.

2. Failing to Handle Notifications

Often, employers will contract with a health insurance company and assume that the vendor is providing COBRA notifications. But, unless that's one of the services specifically provided for in your contract, the vendor may assume you're still handling this function. Clarify with your employee benefits representative who's responsible for notifications.

3. Assuming COBRA Isn't Applicable

Generally, COBRA applies to employers with 20 or more full-time equivalents. But you should understand precisely how that's calculated. The usual rule is that COBRA applies to companies with at least 20 employees on more than 50% of the business days in the previous year. In practical terms, this means if you're subject to the COBRA requirement at all, that requirement is going to last for the whole year. Also, remember you have to count part-time employees as a fraction of a full-time employee. This fraction is determined by the number of hours your company requires for a worker to be considered full-time.

4. Excluding Certain Benefits

The general rule is that if you offer dental, vision or flexible spending account benefits to your current full-time employees, you must also continue to make these available to COBRA beneficiaries. Specific rules apply, however. Contact your employee benefits professional for requirements specific to your particular situation.

5. Not Documenting Notices

Many employers do their best to provide required COBRA notices to employees — but fall short when it comes to documenting that notices were sent. If you have a Department of Labor investigator come in response to a complaint, you'll need to show that you have a reasonable method in place to document the sending of notices. You also must be able to show the investigator records of notices that were provided. If you have established procedures in place, make sure you adhere to them.

6. Failing to Incorporate Recent Notices

Like most federal laws impacting human resources, COBRA is subject to regulatory interpretation. The Department of Labor frequently changes its interpretation of a rule or publishes guidance in response to new situations as they arise. Your documents and procedures must reflect the most current Department of Labor notices and guidance.

If you're an HR professional tasked with the administration of COBRA benefits, you already know this can be a big job. It might be a good idea to print this list and review it now and then as a way to ensure you have covered all the bases and avoided the pitfalls.

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