COBRA compliance is one of the most overlooked — yet most critical — responsibilities for employers offering group health benefits. While many business owners know that COBRA allows employees to continue health coverage after certain qualifying events, the rules surrounding notices, timelines, and documentation can quickly become complicated.
Missing a step can lead to costly penalties, legal exposure, and unnecessary stress. Here’s what employers need to know about COBRA compliance — and what often gets missed.
What Is COBRA?
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows employees and their covered dependents to continue their group health insurance coverage after experiencing a qualifying event that would otherwise cause them to lose coverage.
Common qualifying events include:
- Termination of employment (voluntary or involuntary, not for gross misconduct)
- Reduction in work hours
- Divorce or legal separation
- Death of the covered employee
- A dependent child aging out of coverage
COBRA typically allows coverage continuation for 18 to 36 months, depending on the event.
Required COBRA Notices (And Deadlines)
One of the biggest compliance risks involves notices and strict deadlines. There are multiple required notices, and each has specific timing rules.
1. General (Initial) Notice
- Must be provided within 90 days of coverage beginning.
- Explains COBRA rights to employees and spouses.
Common mistake: Employers forget to provide this notice when coverage first starts.
2. Qualifying Event Notice
- Employer must notify the plan administrator within 30 days of a qualifying event (like termination or reduction in hours).
- For divorce or dependent aging out, the employee must notify the plan within 60 days.
Common mistake: HR teams fail to properly document when the qualifying event occurred and when notice was sent.
3. Election Notice
- Must be sent within 14 days after the plan administrator is notified of the qualifying event.
- Explains the employee’s right to elect COBRA coverage.
The employee then has 60 days to decide whether to enroll.
Common mistake: Sending the notice late or failing to include all required plan information.
4. Notice of Unavailability (If Applicable)
- Required if an individual is not eligible for COBRA after requesting it.
5. Early Termination Notice
- Must be sent if COBRA coverage ends before the maximum coverage period.
COBRA Filings and Documentation
While COBRA itself does not require annual government filings like some other benefit regulations, compliance still requires careful documentation and administration.
Employers should maintain:
- Proof that notices were sent (certified mail or documented electronic delivery)
- Copies of all COBRA election forms
- Payment tracking records
- Documentation of qualifying events and dates
- Premium calculations and rate changes
Failure to maintain documentation can make it nearly impossible to defend against an audit or lawsuit.
Penalties for Non-Compliance
COBRA penalties can be severe:
- IRS excise taxes of $100 per day per qualified beneficiary
- ERISA penalties of up to $110 per day for failure to provide required notices
- Medical claims liability if coverage was improperly denied
- Legal fees and potential lawsuits
For small and mid-sized businesses, even a single compliance oversight can become financially damaging.
What Often Gets Missed
Even well-intentioned employers commonly miss these areas:
❌ Not Sending the Initial COBRA Notice
Many employers focus only on termination events and forget the required general notice at the start of coverage.
❌ Incorrect Premium Calculations
COBRA premiums can include a 2% administrative fee, but miscalculations are common — especially during rate changes.
❌ Poor Recordkeeping
If you cannot prove the notice was sent, regulators may assume it wasn’t.
❌ Overlooking Dependent Rights
Spouses and dependents have independent election rights. Notices must address them appropriately.
❌ Assuming Payroll or HR Software Handles Everything
Most payroll platforms do not fully manage COBRA compliance.
Should You Outsource COBRA Administration?
Because of the strict timelines and documentation requirements, many employers choose to work with a third-party administrator (TPA) or benefits broker to handle:
- Notice distribution
- Election tracking
- Premium collection
- Compliance monitoring
- Record retention
Outsourcing can significantly reduce risk and administrative burden.
Final Thoughts
COBRA compliance is not just about offering continuation coverage — it’s about meeting strict federal requirements with precision. Notices must be timely, documentation must be thorough, and processes must be consistent.
If you’re unsure whether your COBRA procedures are compliant, now is the time to review them. A proactive compliance check today can prevent costly penalties tomorrow.
Need help reviewing your COBRA process or setting up compliant administration? We’re here to help.
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