Manage COBRA and State Continuation Compliance

COBRA, also known by its formal name The Consolidated Omnibus Budget Reconciliation Act of 1985, is a federal regulation that requires employers to offer certain employees and their qualified beneficiaries the option to continue their group health insurance coverage following termination, loss of hours, or other qualifying events.

You may be required to offer COBRA coverage if your business:

• offers group health plans to its employees and;
• has had 20 or more employees during at least half of the typical working days in the previous calendar year.

State Continuation Coverage

Most states pick up where the federal COBRA regulation leaves off, by requiring businesses with 2 to 19 employees to offer their state's version of continuation coverage.

States that do not currently require continuation coverage include:

Potential Penalties

It's important that you thoroughly understand your requirements and closely manage your COBRA or state continuation program. An employer who violates COBRA may be subject to civil and tax penalties, including:

• IRS excise tax penalty of $100 per day for each violation. This fine can be increased to $200 for each day if there was more than one qualified beneficiary per family.
• ERISA penalty of $110 per day, payable to each qualified beneficiary for each day the employer was not in compliance.
• Liability for payment of legal fees, court costs, and medical claims incurred by a qualified beneficiary.

State continuation penalties vary. Visit your state's official website for more information.

Insurance offered through Paychex Insurance Agency, Inc., 150 Sawgrass Dr., Rochester, NY 14620. CA license #0C28207.