One of the first questions a terminated employee might ask is “What is COBRA?” and “What are my rights and options?” In 1986, Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA), which provides health benefits. First, COBRA cannot be offered to employees or their dependents if an employer has more than 20 employees. Employers cannot legally retain an employee on their insurance plan if they do not have full-time employees. The employee or his dependents cannot stay on the previous employer’s plan for more than 18 months, unless the employee is disabled. An employee who is disabled can remain on the plan for up 29 months. The spouse and dependent children have 36 months coverage in the event of death, legal separation, divorce, or separation of the employee. A dependent child who loses their dependent child status would be eligible for continued coverage for 36 months.
COBRA has a downside. If you have a medical condition, you might not be able get the individual plan that you want. Another downside is that your employer can charge you up to 102% of your regular COBRA cost and up to 150% for the last 11 month if you are disabled. This may seem absurd, but it’s true. COBRA can be more costly than individual plans, but there are no waiting periods for preexisting conditions if you sign up in a group plan that has a 62-day lapse in coverage. Preexisting conditions will be covered if there is a lapse of coverage that exceeds 62 days. If you wish to be covered by COBRA, you must make a decision within 60 days of the qualifying event. You have 45 days from the date that you choose to purchase the coverage to make your first payment. You must pay the qualifying event. This could be up to 90 days. COBRA does not cover life insurance benefits. This is a short overview of COBRA. Contact your employer for more information. You can be punished if they fail to provide the information you need on a timely basis. what is COBRA
What are the penalties? The current IRS COBRA penalties, although not as severe as those prior to TAMRA are still severe. An excise tax penalty may be assessed to the emplorer for every day of noncompliance. However, if there are members of the family, the maximum tax per day is $200.
What are the maximum penalties? For each beneficiary who is affected by an employer’s failure to comply, penalties can reach as high as $2500. Employers could be penalized up to $15,000. cobra subsidy If the IRS finds that a violation is more serious than minimal, penalties may reach as high as $2500. Employers can be subject to a maximum tax of $500,000, or ten per cent of the cost for health plans in the preceding year.