Recently, the Internal Revenue Service (IRS) published Revised Audit Guidelines for use by IRS auditors in examining group health plans for COBRA compliance. The revised Guidelines incorporate changes to account for laws that have affected COBRA since the previous guidelines were developed, such as the Health Insurance Portability and Accountability Act (HIPAA) and the Family and Medical Leave Act (FMLA). The Guidelines appear to herald a new COBRA compliance audit effort by the IRS.
The Guidelines provide a general overview of the requirements, limitations, and exceptions of COBRA and the excise tax. Notable highlights from the Guidelines include:
• Some insight into the IRS’s approach to COBRA enforcement. By way of example, the Guidelines provide that when an employer contends that an employee was ineligible for COBRA rights because he was terminated for “gross misconduct,” an auditor may consider whether the employee was granted unemployment compensation benefits, whether the employee grieved his termination under a collective bargaining agreement and the results of any proceedings related thereto, and in some circumstances witness accounts regarding the alleged gross misconduct. If the employee was awarded unemployment compensation benefits and/or won an arbitration regarding his termination, the Guidelines note that the employer may have failed to comply with COBRA.
• A list of documents to be requested by an auditor during a COBRA audit.
• A list of interview questions for an auditor to ask of the responsible parties in order to examine and address specific areas for noncompliance.
COBRA penalties and related damages may arise in two ways. First, potential notice-related penalties of up to $110 per day, per violation, that may be imposed by the federal courts under ERISA’s civil enforcement provisions, plus attorneys’ fees, and possible recovery by the complaining individual in the main enforcement action. Second, the employer or administrator may be subject to COBRA’s excise tax of $100 for each day that a violation continues. These excise taxes may be substantial – and are effectively capped at $500,000 for employers and $2 million for third party administrators.
Employers and administrators should prepare now to structure their COBRA compliance practices and procedures to avoid getting bitten by COBRA’s civil penalties and/or excise tax. In doing so, it is recommended that employers and administrators conduct self-audits, following the Guidelines, to rectify any potential mistakes or problems with their practices and procedures before the IRS selects them for an audit.
Feedback From Our Happy Customers
I wanted to take a moment and tell you how absolutely thrilled I am to have Innovative Benefit Planning as my broker. We moved over roughly a month ago and I have never received service like I have since making the transition. With so many employers being challenged with COVID19 and us making the move right in the middle, it could not have been more seamless. Everything was set up to exceed all expectations and it continues. Innovative Benefit Planning has taken the worry and stress away. It was truly the best decision for Title Alliance and I look forward to a long and productive partnership.
The Innovative team is well respected at AFS. My staff and I feel they are an extension of our HR team! Since implementation, they have always remained committed to assisting AFS with all of its healthcare needs; in fact, it doesn’t matter what time of day, they always respond in a timely manner.
Each year they come up with fresh material so our employee’s interest is always peaked. A few years ago, Innovative provided us with documentation to show that moving from a fully insured program to self-insured would be more cost effective for AFS, and it has been! Innovative has truly made our jobs easier so we can focus on other tasks.
As an HR professional, Innovative makes my job easier and benefits administration much less overwhelming than it would otherwise be.
They are truly a partner with me to make sure our team members have the best benefits and service around their benefits that we can offer. Innovative’s team is responsive, professional and resourceful. (They are at the forefront of knowledge in many areas, including ACA reporting and compliance, which can get highly complicated.)
As a client for the last 4 years, we love working with our Innovative Benefit Planning team because of their service model, scope , depth and quality of expertise in handling our benefits and renewals.
Their level of commitment just keeps getting better each year. They have more than met our expectations on renewal negotiations, response time, assistance with ongoing plans, open enrollment material, meetings, support, bill auditing, and wellness programs.
Since our partnership with Innovative Benefit Planning in 2017, it has been a seamless one. Innovative always provide options, suggestions and recommendations when it comes to our benefits renewal.
Innovative is always present even when open enrollment ends, their year round communication reminds me that I can always reach out for help at any time. Their professionalism is the utmost one can expect. My account representative Jenni is wonderful, courteous, knowledgeable and very helpful.
We have been dealing with Innovative Benefit Planning for many, many years. They have given us nothing but exceptional service.
We can pick up the phone or email them and they always resolve our questions and take care of our employees insurance issues in a very timely manner. They negotiate our insurance rates every year and have managed to reduce the increase every year. Every account manager we’ve had throughout the years have been great to work with.
I have been working with Innovative Benefit Planning for over six years. Previous to Innovative, I had used the same broker for about 25 years. I was used to doing everything myself during open enrollment with my previous broker.
When Innovative came on board, I was pleasantly surprised how “on top” of things they were. I never have to call them and bother them about getting rates to me for open enrollment, as they are in touch with our carriers on a regular basis, and they get me my information for open enrollment as soon as they receive it from the carriers.