What is the cost of COBRA non-compliance?
COBRA is jointly enforced by the Internal Revenue Service, the U.S. Department of Labor and the Department of Health and Human Services. Penalties for COBRA violations include: • Excise tax penalties of $100 per day ($200 if more than one family member is affected) • Statutory penalties of up to $110 per day under the Employee Retirement Income Security Act (ERISA) • Civil lawsuits • Attorneys’ fees and interest The minimum tax levied by the IRS for noncompliance discovered after a notice of examination is generally $2,500. The maximum tax for “unintentional failures” is the lesser of 10 percent of the amount paid during the preceding tax year by the employer for group health plans, or $500,000. The IRS currently performs more than a dozen audit procedures for COBRA compliance, and places the burden of proof of compliance on the company. Unnecessary COBRA claims are costly and often the responsibility of the employer rather than the insurance carrier. Legal fees, penalties and employee
