If an individual who is eligible for the subsidy makes a COBRA premium payment, the employer must reimburse the payment to the individual within 60 days of its receipt. Failure to timely distribute COBRA notice or the failure to include these specifics in the COBRA notice can lead to a $110/day per person penalty. The penalty may be up to $100 per day from the date of the failure to provide the COBRA notice and include such other relief as the court deems proper. IRS Excise Tax Penalties Systemwide notice failures can lead to costly class action litigation. Employers and plan administrators should frequently review their Consolidated Omnibus Budget Reconciliation Act (COBRA) procedures to ensure initial and election notices are distributed on a timely basis. Providing COBRA notice and allowing the employee to continue dental coverage under the group plan would have cost the employer little to nothing. §§ 1166(a)(1) – (1) “at the time of commencement of coverage” or (4) after a “qualifying event” – “with respect to a participant or beneficiary … Notice Requirements. COBRA general notice, of the responsibility to notify the plan and procedures for doing so. "You have 30 days to notify the plan administrator (usually the insurance company) when a loss occurs for any of the reasons listed above, except for divorce and change of status by a dependent," reports BizFilings . A court can impose on an employer a penalty of up to $110 a day for failure to provide that COBRA notice. While the amount is discretionary, courts have generally considered whether the employer acted in bad faith. Generally, the civil penalty for failure to provide benefits is up to $110.00 per day per affected plan participant, to be levied against the plan administrator. The IRS allows an employer a 30-day grace period to correct a violation that was due to negligence or was accidental. The court concluded that the lack of prejudice to the employee and the lack of bad faith on the part of the employer weighed heavily against imposing a statutory penalty. Employer claims "gross misconduct" exception after being sued for failure to send proper COBRA notices Posted on 03/17/2015 at 02:34 PM by Russell Samson Update to COBRA "gross misconduct" post : Since this blog was posted in February 2012, the Affordable Care Act's marketplace provisions for the purchase of health insurance have been implemented. Within 14 days of that notification, the plan administrator is required to notify the individual of his or her COBRA rights. COBRA election notices must be written in a manner calculated “to be understood by the average plan participant” and include: If the employer is also the plan administrator and issues COBRA notices directly, the employer has the entire 44-day period in which to issue a COBRA election notice. For single employer plans, the overall limit on the liability for excise tax penalties for failures due to reasonable cause (and not willful neglect) is $500,000.211 Qualified beneficiaries may sue to recover statutory penalties of $110 per day for a plan’s failure to provide him or her with the General Notice or the COBRA or Election Notice.212 There are multiple potential penalties for employers who fail to comply with COBRA. The district court granted relief in the form of a penalty of $10 per day calculated from the time the employee first resigned until the COBRA notice was received. the inability to enforce the qualifying event notice deadline on plan participants (e.g., 60-day notice for a divorce) which gives an individual more time to elect COBRA. As an extra precaution, many COBRA plan administrators mail COBRA notices with the United States Postal Service (USPS) Proof-of-Mailing certificate. The court can award a penalty up to $110 per day for notice violations. The employee-plaintiff in this case was fired from his job in August 2014 by a letter hand-delivered to his home address. An employer had to pay more than $25,000 in penalties for failing to provide a COBRA election notice to a terminated employee and her children. However, the employer failed to send the COBRA notice to the affected employee. The plan isn’t obligated to send monthly premium notices but must provide a notice of early termination if it terminates continuation coverage early due to failure to make a timely payment. §1132(c)(1) by its terms provides that any plan administrator who “fails to meet the [notice] requirements” of 29 U.S.C. Trinity Health Corp., the court needed to use its discretionary authority in determining whether COBRA penalties for failure to provide the COBRA notice should be … The notice must properly identify the COBRA administrator (which may be the same as the plan administrator or contracted out to another service provider) and include adequate contact information. Employer Penalties for Violating COBRA. As a result, the health insurer or stop loss carrier may not cover health care expenses during the COBRA period, with the liability then falling on the employer. The court noted that “COBRA simply does not cover a situation” under which a qualifying event occurs when an employer’s plan lapses because of failure to pay plan premiums. (Section 502(c)(1) of the Employee Retirement Income Security Act of 1974 (“ERISA")) In addition, the employer would be required to pay the employee’s attorneys’ fees and costs in addition to these penalties if an employee is … Most plan administrators know that, under ERISA, a court can award a penalty of up to $110/day for each day that a COBRA notice … Failure to include required information such as a general description about coverage, how to elect coverage, coverage dates, and payment requirements. If your plan does not have reasonable procedures for how to give notice of a qualifying event, you can give notice by contacting the person or unit that handles your employer's employee benefits matters. In a recent decision of the U.S. Court of Appeals for the Second Circuit, the court affirmed the dismissal of a former employee’s claim for penalties against an employer who failed to provide the COBRA notice. If the employer also is the plan administrator and issues COBRA notices directly, the employer has the entire 44-day period in which to issue a COBRA election notice. An employer/plan administrator is facing a class-action lawsuit regarding three COBRA claims alleging that its election notice (1) was not specific enough about the date that COBRA coverage is to end, (2) did not specifically state where to send premium payments, and (3) could not be understood by the average plan participant. Then, the provider has 14 days to send a COBRA election notice to those impacted.