3 Common COBRA Pitfalls
1. Not offering COBRA coverage for all health plans.
COBRA applies to more than just medical, dental, and vision plans. COBRA also applies to flexible spending accounts, health reimbursement accounts, and prescription plans. In addition, COBRA regulations may apply to on-site medical clinics and certain wellness and employee assistance programs.
2. Not correctly identifying all COBRA qualifying events when they happen.
Qualifying events for employees include voluntary or involuntary termination (except when caused by gross misconduct) and reduced work hours.
In addition to the above, qualifying events for spouses include death or divorce of the covered employee, and Medicare qualification of the covered employee.
Dependent children have the same qualifying events as spouses. They may qualify for COBRA upon removal from their parents plan at the age of 26.
3. Failing to send all required COBRA notices.
Not sending the required notices or failing to send the notices within the proper time frame can result in penalties. Each notice must contain specific information. Communications should be addressed to the employee and family when dependents are eligible for COBRA.
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Employers Cautioned as Suits Over COBRA Coverage Notices Add Up
“The costs of the litigation can add up. Many of the approximately 50 cases filed over the past four years have been settled. Earlier this year, Home Depot settled a case for $815,000, Fiat Chrysler settled for $600,000, and Costco agreed to pay $750,000. And, there’s a trend toward defendants asking courts to rule rather than settling the cases, employment lawyers say.” (Bloomberg Law)