COBRA Administration: What Every Employer Must Know

COBRA — the Consolidated Omnibus Budget Reconciliation Act — is one of the most misunderstood compliance obligations for employers. Get it wrong, and you're looking at penalties of $110 per day per qualified beneficiary, plus potential lawsuits.

This guide breaks down exactly what COBRA requires, who it applies to, and how to stay compliant.

Who Must Comply with COBRA?

COBRA applies to private-sector employers with 20 or more employees who sponsor group health plans. If you have fewer than 20 employees, you may still be subject to state "mini-COBRA" laws, which vary significantly by state.

What Triggers COBRA?

A "qualifying event" triggers an employee's (or dependent's) right to elect COBRA continuation coverage. Common qualifying events include:

• Termination of employment (voluntary or involuntary, except for gross misconduct)
• Reduction in hours that causes loss of eligibility
• Divorce or legal separation from the covered employee
• Death of the covered employee
• Dependent child aging off the plan (typically at age 26)
• Medicare entitlement of the covered employee

The COBRA Timeline: Critical Deadlines

COBRA compliance is deadline-driven. Missing a deadline — even by one day — can expose you to significant liability.

Employer Notification to Plan Administrator

Within 30 days of a qualifying event, the employer must notify the plan administrator.

Plan Administrator Notice to Qualified Beneficiaries

Within 14 days of receiving notice from the employer, the plan administrator must send the COBRA election notice to qualified beneficiaries.

Election Period

Qualified beneficiaries have 60 days from the later of the coverage loss date or the date the election notice was sent to elect COBRA.

Premium Payment

Once elected, the first premium payment is due within 45 days. Subsequent payments have a 30-day grace period.

How Long Does COBRA Last?

• 18 months — Standard duration for termination or reduction in hours
• 36 months — For qualifying events involving dependents (divorce, death, Medicare entitlement, dependent aging off)
• 29 months — Extended for disability (if SSA determination is made within 60 days of election)

Common COBRA Mistakes Employers Make

1. Missing the Initial Notice Requirement

Employers must provide a General Notice to new enrollees within 90 days of coverage beginning. Many employers skip this step entirely.

2. Incorrect Qualifying Event Classification

Misclassifying a qualifying event can result in the wrong coverage period being offered — a compliance violation.

3. Failing to Notify on Dependent Events

Employees are responsible for notifying the plan administrator within 60 days of certain qualifying events (divorce, disability, dependent aging off). Employers must have a documented process for receiving these notifications.

4. Incorrect Premium Calculation

COBRA premiums can be up to 102% of the full plan cost (100% + 2% administrative fee). Charging less than the full amount is a compliance error.

COBRA and the ACA Marketplace

Employees who lose coverage have a Special Enrollment Period to enroll in an ACA Marketplace plan. In many cases, Marketplace coverage may be more affordable than COBRA — especially if the employee qualifies for a premium tax credit.

As an independent advisor, we help departing employees understand all their options — not just COBRA.

Simplifying COBRA Administration

COBRA administration is complex, time-consuming, and high-risk if handled internally without expertise. Many employers outsource COBRA administration to a third-party administrator (TPA) to reduce liability and administrative burden.

Our sister service, COBRA Shield Pro, specializes in full-service COBRA administration for employers of all sizes. We handle notices, elections, premium collection, and compliance tracking — so you don't have to.

The Bottom Line

COBRA compliance is not optional, and the penalties for non-compliance are severe. If you're not confident in your current COBRA administration process, now is the time to review it.

Contact our team to discuss your COBRA obligations and how we can help you stay compliant.

---

Anderson Financial Group is an independent insurance and financial advisory firm. COBRA Shield Pro is a specialized COBRA administration service.