The IRS recently updated the guidelines its agents use to conduct COBRA compliance audits. The COBRA audit guidelines are not directly aimed at employers, but employers can certainly benefit from understanding the procedures IRS agents follow to review COBRA compliance for group health plans. Now is a good time for employers to review their COBRA administration practices to make sure their plans are in compliance with the COBRA rules. BAS' Cobra Control Services can assist with COBRA compliance, as its processes and systems are intended to help employers meet their COBRA obligations.
Under the new guidelines, an IRS COBRA audit will include a review of
- The employer's COBRA procedures;
- Form letters sent to qualified beneficiaries;
- Internal audit procedures;
- Copies of group health plan documents; and
- Identification of past or pending lawsuits related to a failure to provide COBRA coverage.
It is suggested that auditors may also request from employers additional information, including
- Copies of Federal and state employment tax returns filed during the current and previous plan year showing changes in the number of employees;
- List of all individuals affected by a qualifying event during the current year; and
- List of all individuals covered during the current and preceding years for each plan.
The Internal Revenue Code imposes a tax penalty on employers who do not comply with COBRA requirements. The tax penalty is $100 per qualified beneficiary, but not more than $200 per family, for each day of a period that the employer violates COBRA rules. Since penalties accumulate daily, the potential financial impact for COBRA non-compliance can be huge. However, there is an overall limit on the penalty tax for unintentional failures due to reasonable cause and not to willful neglect.
If audited by the IRS, the auditor will ask the employer about the number of qualifying events during the year, the method by which qualified beneficiaries are notified of their COBRA rights, the method by which the plan administrator is notified of a qualifying event, the election procedure, and how premiums are paid.
BAS can help employers achieve COBRA compliance consistent with the new IRS audit guidelines. Cobra Control Services, LLC provides online documentation of notices sent, along with a set process and procedures for employers to follow when sending COBRA notices and processing premium payments. CCS's fully automated system has
- Current, compliant COBRA notices;
- Full administration, from sending notice upon qualifying event, to billing and collecting COBRA premiums;
- The option to distribute the required initial COBRA notice to all employees for an additional charge;
- On-line access of documents sent for audit purposes;
- Proof of mailing;
- Lockbox for payment receipts; and
- Dedicated account manager and customer service.
All these services are provided for a minimal one-time charge for each qualifying event letter that is generated, plus a small annual charge (and the federally permissible administrative fee paid by the participant). CCS' prices are significantly reduced since CCS does not charge a costly per-employee-per-month fee, but rather a "per-event" fee. For more information, please contact sales@BASusa.com.
