Employers that violate COBRA notice requirements under the federal Consolidated Omnibus Budget Reconciliation Act of 1986 are subject to civil actions and tax penalties.
The penalties apply to all types of required COBRA notices, including: (a) initial COBRA rights notices that employers or their plan administrators must send to employees when they first become covered under group health plans, (b) notices of certain qualifying events that employers must send plan administrators, (c) COBRA election rights notices and other notices that employers or their plan administrators must send qualified beneficiaries, and (d) notices that employers or their plan administrators must send to assistance eligible individuals.
The Department of Labor and qualified beneficiaries can sue employers that fail to provide any required COBRA notices. Employers can be fined up to $110 a day for each employee, spouse, and dependent who they fail to provide required COBRA notices.
In addition, the Internal Revenue Service can assess employers non-deductible excise taxes of $100 a day for every qualified beneficiary to whom employers fail to provide notices. Tax penalties are capped at $200 per day with respect to each affected family. Employers’ maximum liability for tax penalties is limited to the lesser of $500,000 or 10 percent of the preceding year’s total costs of providing group health coverage.