As if the noncompliance penalties from the IRS and DOL aren't enough to worry about, you can't rule out the potential for private civil action in either state or federal court. (Photo: Shutterstock)
If you're an employer or benefits administrator, navigating COBRA (aka the Consolidated Omnibus Budget Reconciliation Act of 1985), probably isn't how you spend most of your day. But that doesn't mean you should put COBRA on the back burner.
Why?
The fines associated with COBRA noncompliance are no joke. Hopefully, you never have to endure a COBRA audit from the IRS, but it is also important to know what's at stake. This article will break down what financial penalties currently look like, and offer some tips to stay COBRA compliant, so employers can steer clear and up their compliance game. (Remember: Always consult legal counsel for advice and information concerning individual situations before making any decisions.)
Noncompliance cost #1: The IRS excise tax
If the IRS finds an employer to be out of compliance with COBRA regulations, the minimum they can charge is $2,500 for each beneficiary who is affected by the compliance violation, OR $100 for every day the employer was not compliant, whichever is a greater cost to the employer. If the IRS determines that the violation is on a large scale, the employer can be fined up to $15,000. While this doesn't necessarily ease the pain, there are limits as to how much the IRS can fine: either 10 percent of the employer's health plan costs in the previous year, or $500,000—whichever is the lesser of the two.
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