Employers everywhere must prepare for the COBRA subsidy. To stay in compliance, employers will need to facilitate a 102% COBRA premium subsidy for eligible former employees, as well as provide all applicable notices. HR and payroll experts warn employers to prioritize compliance with this COBRA premium subsidy, because penalty fines will be steep. Below is part two of a series of questions and answers from MP’s HR services experts. This article will help employers gain a better understanding of what they need to do to stay in compliance for this subsidized COBRA coverage program, particularly when it comes to sending notices.
Notice Requirements for the COBRA Subsidy:
Q: An employee involuntarily terminated last year, but only certain family members elected coverage. Does the employer need to send notices and offer coverage to the family members who originally declined?
A: Yes. Sending notices will be a laborious task for employers, but it is required. Employers may find that their third-party COBRA Administrator will help with this. However, the responsibility for compliance sits with the employer. Employers should review their list of terminations from November 2019 to today (or longer for certain circumstances) and examine who was terminated involuntarily. They should then confirm with their third-party administrator that those who are eligible for the subsidy will receive the new COBRA notices.
Q: Do we need to inform employees of this benefit?
A: No. Employers do not need to inform employees or former employees who won’t be eligible for it.
Q: From what date do employers begin to look back in order to identify people that they must send 60-day notices to?
A: As a general rule of thumb, employers should look back 18 months. A good rule of thumb is looking back from November 2019 to today. Note that in some rare cases, employers may have some former staff who were eligible for a longer period of time (like 36 months).
Q: If an outside company handles all corporate compliance matters, including sending notices, does the employer have any responsibility to send notices?
A: Employers should reach out to their third-party provider. They may require input to help determine which employees were terminated voluntarily and which were terminated involuntarily. While the employer may have an agreement that the third-party provide is responsible for sending the notices, this may not be enough. As the employer of record, the business or organization is responsible for compliance with this law. The employer would be the responsible party for the penalties if required notices were not provided to Assistance Eligible Individuals (also known as AEIs).
Q: For small employers that are subject to Mini-COBRA laws, should the carrier send the notice or the employer?
A: There is a specific model notice for Mini-COBRA continuation. If employers are subject to it, they should connect with their insurance carrier. The insurance carriers may manage the notification process. However, they might need some help from employers to know who was terminated voluntarily or not. It could also vary from carrier to carrier. Employers should cover their bases and check in with their carrier.
Penalties Related to the COBRA Subsidy
Q: Where are the potential penalties for businesses who do not comply with providing the COBRA subsidy?
A: If employers do not send notices to the former employees who are eligible for the subsidies, there will be penalties. The penalty will be up to one hundred dollars a day per qualified individual. The fines will be a maximum of two hundred dollars a day per family. The deadline to get the 60-day election window notice is May 31st, so employers should not delay. Employers should send notices and get their recordkeeping in order before May 31st to avoid incurring any fees.
Q: What are the potential ramifications if a former employee lies to obtain the subsidy?
A: If an employee has a new, benefits-eligible position, or if they’re able to get on their spouse’s plan, they are technically disqualified from COBRA premium assistance. Currently, all available guidance does not go into great detail about how these penalties will be leveraged or what they will be. There’s speculation that offenders may be subject to unspecified tax penalties.
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