COBRA Admin Mistakes
That Could Cost You
COBRA compliance isn't just paperwork—it's a minefield of potential penalties that can devastate your business. A single administrative error can trigger fines ranging from $110 per day per violation to $2 million per plan year. For mid-market companies managing 50-500 employees, these mistakes compound quickly.
The Department of Labor and IRS have ramped up enforcement significantly. Companies that once flew under the radar now face scrutiny that can result in six-figure penalties. The good news? Most COBRA violations are preventable with proper administration.
Most Common COBRA Mistakes That Trigger Penalties
Missing the 30-Day Notice Window
The clock starts ticking the moment an employee losescoverage. Employers have 30 days to notify their COBRA administrator, but manymiss this deadline. Late notifications cascade into late employee notices,triggering automatic penalties.
Incomplete Election Notices
Generic COBRA notices fail compliance requirements. Each notice must include specific plan details, exact premium amounts, and payment instructions. Cookie-cutter templates from the internet often miss crucial elements that regulators demand.
Premium Calculation Errors
COBRA premiums can't exceed 102% of the full cost of coverage (150% for disability extensions). Miscalculating these amounts—whether too high or too low—creates compliance violations and potential lawsuits.
Inadequate Documentation
The DOL requires detailed records of every COBRA action.Companies using spreadsheets or basic tracking systems struggle to maintain the documentation depth regulators expect during audits.
Qualifying Event Misidentification
Not every employment change triggers COBRA rights.Misidentifying qualifying events leads to unnecessary administrative burden or,worse, failing to offer required coverage.
Who Should Handle COBRA Administration?
Internal Administration Challenges
Handling COBRA internally seems cost-effective until you factor in the real expenses. HR teams spend 15-20 hours monthly on COBRA tasks for every 100 employees. These hours multiply during peak termination periods.
Internal teams also lack specialized knowledge. COBRA regulations span multiple federal agencies with frequent updates. Keeping current requires dedicated compliance expertise most companies can't justify maintaining in-house.
Third-Party Administrator Advantages
Professional COBRA administrators bring economies of scale and specialized expertise. They maintain current compliance knowledge, use purpose-built systems, and carry errors and omissions insurance that protects your company.
The best TPAs offer integrated solutions that connect COBRA administration with your existing benefits systems, creating seamless workflows that reduce errors.
IRS & DOL Enforcement Trends for 2025
Increased Audit Activity
Federal agencies are targeting mid-market companies more aggressively. The DOL's enforcement budget increased 23% for employee benefits compliance, with COBRA violations being a primary focus area.
Technology-Driven Investigations
Regulators now use data analytics to identify compliance patterns. Companies with inconsistent notice timing or unusual premium structures trigger automated investigation flags.
Higher PenaltyAssessments
Recent penalty assessments show regulators are pursuing maximum allowable fines rather than warning letters. The average COBRA penalty has increased 340% since 2022.
What Great COBRA Administration Looks Like
Automated Compliance Systems
Top-tier COBRA administration uses integrated technology that automatically tracks qualifying events, calculates premiums, and generates compliant notices. These systems maintain audit trails that satisfy regulatory requirements.
Proactive Communication
Excellent administrators don't just react to qualifying events—they educate employees about COBRA rights before termination, reducing confusion and potential disputes.
Comprehensive Reporting
Top-tier COBRA administration uses integrated technology that automatically tracks qualifying events, calculates premiums, and generates compliant notices. These systems maintain audit trails that satisfy regulatory requirements.
How Fox Everett Keeps You Compliant
Fox Everett's COBRA administration removes compliance risk through integrated technology and hands-on expertise. Our system automatically tracks qualifying events from yourHRIS, calculates exact premiums, and generates legally compliant notices within required timeframes.
Our dedicated compliance team stays current with regulation changes and maintains the detailed documentation trail regulators demand. We carry comprehensive E&O insurance, so you're protected even if errors occur.
Most importantly, we treat COBRA as part of your complete benefits ecosystem, not an isolated administrative task. This integration reduces errors and creates better employee experiences during difficult transitions.
Ready to eliminateCOBRA compliance risk? Discover how Fox Everett's integrated approach protects your business while reducing administrative burden.
