COBRA Compliance Checklist for HR: Step-by-Step Guide for MD, DC, and VA Employers
Key takeaways
- COBRA lets eligible employees and dependents keep group health coverage after a qualifying event like job loss.
- It generally applies to employers with 20 or more employees, though some states have mini-COBRA rules for smaller groups.
- Coverage typically lasts 18 to 36 months depending on the qualifying event.
- Missing notice deadlines is a common, costly compliance mistake HR teams should guard against.
COBRA Compliance Checklist for HR
The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) allows eligible employees and family members to continue employer-sponsored health coverage after a qualifying event. It’s a complex law that continues to evolve.
Managing COBRA compliance is critical to employee rights and organizational reputation. Staying compliant requires attention to detail, timely communications and thorough recordkeeping.
This HR compliance checklist can guide your team through essential steps, including:
Qualifying events
Notice requirements
Premium calculations
Elections and payments
Documentation
Process reviews
Qualifying events
Determine an employee’s or beneficiary’s qualifying event:
Voluntary termination
Involuntary termination
Reduction in hours
Divorce/legal separation
Death of covered employee
Dependent aging out of coverage
Covered employee becoming entitled to Medicare
Implement software or work processes that highlight potential qualifying events. Record qualifying events by type and date reported.
Notice requirements
Send COBRA election notices within required timeframes:
Notify your plan administrator of the qualifying event within 30 days of it occurring.
Ensure the plan administrator sends an election notice to the affected employee within 14 days of being notified.
Track the delivery methods and dates for COBRA notices.
Note: If your organization administers the plan, you have 44 days (30 days plus 14 days) from the qualifying event to send the notice to the affected employees.
Include the following information in the notice:
Name of the employee and qualified beneficiaries eligible for coverage
Statement noting that eligible beneficiaries have an independent right to elect COBRA coverage
Reminder to inform the plan administrator of qualified beneficiaries’ addresses
End date for health plan coverage if COBRA is not elected
Qualifying event for COBRA eligibility
Description of when COBRA might be extended due to a second qualifying event
COBRA plan administrator contact information, including plan name, address and telephone number
Rights to continuation coverage
Information on electing COBRA
Information on the consequences of not electing COBRA
Election deadlines
Coverage options
Duration of COBRA coverage, including maximum length, date of termination, and situations in which COBRA coverage could be shortened
Premium amounts, payment procedures and due dates
How to find additional information in the summary plan description
Premium calculations
Document and communicate the details of COBRA premiums and administrative fees.
Calculate the base premium for covered plans at the time of the qualifying event (e.g., medical, dental and vision). Total plan costs include the employee and employer portions of the premium.
Add the administrative fee to the base premium. COBRA regulations allow a 2% administrative fee to be added to the total cost of health coverage. Double-check that total expenses do not exceed 102% of plan costs.
Note the exception for higher administrative fees for disability extensions. If an individual is eligible for an 11-month disability extension of COBRA coverage, you can increase the administrative cost to 50% for months 19 through 29.
Ensure that premium calculations are consistent for all similarly situated individuals.
Adjust premiums for family/beneficiary coverage or plan changes.
Review and update premium rates annually.
If you outsource COBRA administration, work with your vendor to ensure consistent, uniform premiums and administrative fees.
Elections and payments
Employees have 60 days to elect COBRA coverage. Once individuals and eligible beneficiaries make an election, they have 45 days to make their first payment. COBRA also offers a 30-day grace period in which they can make a payment without losing coverage.
Track the 60-day election window for eligible individuals and qualified beneficiaries.
Monitor the 45-day deadline for initial payments.
Enforce monthly grace periods.
Follow termination rules.
Consider using a software system or reputable vendor to track COBRA deadlines for elections, payments and grace periods. Failing to enforce deadlines can create exceptions to plan terms and breach fiduciary duties under the Employee Retirement Income Security Act.
Documentation
Maintaining accurate documentation is crucial to COBRA compliance. COBRA is subject to participant claims, and the IRS and Department of Labor can audit COBRA compliance. Proper recordkeeping demonstrates adherence and can help your organization avoid legal and statutory penalties.
Keep a record of the following documents:
COBRA eligibility verification
Notices sent and received, including COBRA rights and qualifying events
Election forms and proof of receipt
Premium costs and payment histories
Grace periods for premium payments
Employee and beneficiary communications
Termination of coverage
Plan documents, including the summary plan description and plan amendments
Third-party agreements
Use digital systems to store and organize COBRA documents. Work with reputable third-party COBRA administrators. Maintain records for at least six years in case of audits or participant disputes.
Process reviews
Maintain a manual of COBRA coverage procedures and standard form letters for qualified beneficiaries
Conduct an annual COBRA compliance audit.
If you use a third-party COBRA administrator, review their costs, services and performance annually.
Check for new and emerging COBRA regulations, including state-specific mini-COBRA laws.
Update internal policies and training materials as needed.
Remember that many states have their own “mini-COBRA” laws, which can add to your compliance obligations. For more information on COBRA rules, reviews and compliance, contact your insurance broker or benefits adviser. They can help you streamline your processes, conduct compliance audits and partner with reputable COBRA administrators.
Frequently Asked Questions
What is COBRA?
COBRA is a federal law that lets employees and their covered dependents temporarily continue group health coverage after certain events, such as a job loss or a reduction in hours. The individual usually pays the full premium plus a small administrative amount.
Which employers have to offer COBRA?
Federal COBRA generally applies to employers with 20 or more employees. Smaller employers are often subject to state continuation rules instead, which is why Maryland, DC, and Virginia each have their own requirements to check.
How long can COBRA coverage last?
It depends on the qualifying event, but continuation often lasts up to 18 months, and longer in some situations. The exact timeframe depends on the circumstances.
What are common COBRA compliance mistakes for HR teams?
Frequent issues include missing notice deadlines, using outdated notice language, and not documenting who was offered coverage and when. Clear processes and timely notices help avoid penalties. We are glad to help you review your approach.
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