Is your company subject to COBRA? The first step is acceptance… that is, if you are required to offer continuation coverage to your employees. The second is compliance – yes, the “c” word.
We’ll cover just the employer eligibility basics here. If you’re required to offer COBRA and you don’t, you could be hit with up to a $110 per day, per “missed notification” penalty! We’re here to help you avoid a visit from the Department of Labor.
COBRA what?
This is the short and sweet name for the Consolidated Omnibus Budget Reconciliation Act of 1986. Now you know why we just call it COBRA. It’s part of Federal ERISA laws, providing continuation of some benefits to employees and dependents losing their group coverage. In general, COBRA allows 18, 29, or 36 months of continued coverage. The employee must pay the full monthly premiums, plus up to an additional 2% in administration fees.
Employers subject to COBRA
COBRA applies to employers who had 20 or more employees during more than 50% of the prior calendar year. If there is common ownership of multiple companies, they all need to be calculated together to make your COBRA determination.
COBRA does not apply to plans sponsored by the Federal government, a church, or certain church-related organizations.
You’ll need to count all your full time and part time employees (including seasonal employees), even if they are not eligible for your benefits or if they are waiving the coverage you offer. Only “common-law” employees are counted – not independent contractors, self-employed persons, and members of the board of directors (unless they are common law employees).
Full time employees are easy – they count as 1. But part time employees only count as a fraction of a full time employee, based on their hours worked.
When COBRA requirement starts
At the end of every year, you have to do your employee calculation. If you hit that 20 employee threshold, you’ll have to start offering COBRA on January 1st. For example, if your average number of employees in 2014 is 20+, you will need to offer COBRA as of January 1, 2015.
Which benefits are extended
Continuation coverage under COBRA is available for medical, prescription, vision, and dental coverage as well as Health Reimbursement Arrangements and Health Flexible Spending Accounts. The coverage provided must be identical to the coverage active employees receive. An Employee Assistance Plan (EAP) must be provided under COBRA if the EAP provides medical services. If your EAP provides on-site or telephonic counseling, you would need to provide this under COBRA. If your EAP only provides referrals to counselors, it won’t be subject to COBRA.
How to get started
As soon as you know you’re going to need to offer COBRA, talk to your agent. They’ll need to alert your insurance carriers. They’ll also talk you through the options of administering your COBRA yourself, or paying a vendor to take that off your hands.
A new wrinkle: Some Trust plans are now being required to offer COBRA to every employer group they insure, regardless of the number of employees each client has on staff.
This article is provided for informational purposes only. Please contact your attorney and/or accountant to determine if this information may affect your business. © 2015 GHB Insurance
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