Preventing Common COBRA Mistakes – Do’s and Don’ts

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With so many requirements under COBRA, it’s easy to make a mistake that could result in costly penalties. Understanding your responsibilities when it comes to compliance is the best way to prevent expensive mistakes. The following do’s and don’ts can help you get started.

  • DO count part-time employees to determine whether your plan is subject to COBRA. COBRA generally applies to group health plans maintained by employers with at least 20 employees on more than 50% percent of typical business days in the prior year. Each part-time employee counts as a fraction of a full-time employee, equal to the number of hours the part-time employee worked divided by the hours an employee must work to be considered full-time.
  • DO stay on top of required notices. Use the Model General Notice and Model Election Notice provided by the U.S. Department of Labor to help satisfy notice requirements. Keep track of when and to whom notices are sent (and don’t forget to provide a separate notice to the spouse or dependent child if necessary).
  • DON’T overlook qualifying events. Remember that if a plan measures eligibility for coverage by the number of hours worked in a given time period, an employee’s failure to work the minimum number of required hours may be considered a reduction in hours that gives rise to COBRA election rights.
  • DON’T terminate COBRA coverage too early. There are very specific rules regarding when COBRA may terminate prior to the end of the maximum period of coverage (for example, when premiums are not paid). In certain circumstances the maximum period of COBRA coverage may be extended due to disability or the occurrence of a second qualifying event.
  • DON’T forget about state law. Many states have enacted what are commonly referred to as ‘mini-COBRA’ laws, which typically require continuation of group health plan coverage provided by employers with fewer than 20 employees. Employers of all sizes should check to see if a state mini-COBRA law applies to their plans and if so, how the law differs from federal COBRA.

Most importantly, DO consult with a trusted employment law attorney or benefits advisor if you have any questions as to how COBRA applies to a particular plan or your obligations under the law.