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What are the penalties if our company has failed to comply with the COBRA law?

We may not have sent a notification out in time. What are the fines for a business who doesn’t comply with COBRA?

Employer Penalties for COBRA Non-Compliance

Employers who fail to comply with COBRA regulations may face significant financial penalties, IRS excise taxes, and potential legal action. Below is a breakdown of possible penalties and fines associated with COBRA violations.

IRS Excise Tax Penalty

Employers may be fined $100 per day for each qualified beneficiary affected by the non-compliance, or $200 per day per family. This penalty applies for each day the employer fails to offer or administer COBRA coverage properly.

Minimum Penalty Upon Audit

If non-compliance is identified during an IRS audit and has not been corrected, the employer faces a minimum penalty of $2,500 per beneficiary or the daily excise tax listed above, whichever is less.

Penalties for Significant Violations

For violations deemed “more than trivial” by the IRS, penalties can escalate up to $15,000 per violation.

Annual Cap on Penalties

The total fines imposed on an employer cannot exceed $500,000 annually or 10% of the total health care costs from the previous year, whichever is less.

Legal Action by Employees

Employees and beneficiaries who were not offered COBRA continuation coverage have the right to sue for medical expenses that should have been covered. Courts may also require employers to pay the plaintiff’s attorney fees if the employee wins the case.

Correction Period

If a COBRA violation is corrected within 30 days and is proven to be unintentional, penalties may be reduced.

Failure to comply with COBRA requirements may result in significant financial penalties. Employers should ensure they meet all COBRA obligations to avoid fines and legal consequences.

For official COBRA enforcement details, visit the U.S. Department of Labor COBRA Guidelines.

Employer Responsibility For COBRA

COBRA is a federal law that allows workers and their families to retain their workplace health insurance if it would otherwise end. This law applies to companies with 20 or more employees. Employers must send notifications, manage enrollment and handle premium payments under COBRA regulations.

For Employers

When an employer stops subsidizing an employee or a qualified beneficiary’s health insurance premium, the company must create a special open enrollment period to allow these individuals to continue their health insurance. Read more in the Employers’ Guide To COBRA.

For Employees

Report Non-Compliance to the Department of Labor

If an employer fails to comply with COBRA regulations, you can report the violation to the Department of Labor for investigation.

If you need to report COBRA non-compliance, contact the Department of Labor at 1-866-487-2365.

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