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COBRA premiums - Charging too Much

PaperclipPaperclip 2 Posts
in HR & Employment Law Vote Up0Vote Down
Is anyone aware of the penalties for companies who overcharge COBRA participants for medical coverage? For example if instead of the premium for non-disableds being 102% of the active premium (employer + employee costs), the rate is set (and paid) at 200% of the active premium, what recourse does the participant have in terms of refunds? Interested in references to COBRA regs which might pertain.

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  • mwild31mwild31 1,441 Posts
    PMVote Up0Vote Down
    Okay - I'll take a stab at this one. The penalties can be pretty stiff for the employer & are not necessarily off the hook even with a TPA. Not only can the DOL access penalties, but the IRS can as well. If your company is truly overcharging - willfully in violation, and all I can say is that it sounds like it is, as the rules seem pretty emphatic that the ee should only have to pay 100% of premium and 2% of admin. fees, you can face an excise tax of $100 per day for each day of noncompliance or $200 per day per family (if there are more than 1 beneficiaries involved). In addition, if violations are not corrected before the IRS gets wind of it and then sets up an audit (hello angry former employee blowing the whistle) - you're in for even more money. The maximum for the IRS, including other fines not discussed, is $500,000 or ten percent of the health plan costs in the previous year, whichever is less. Noncompliance begins on the date the first violation occurred and ends on the day the failure is corrected - so, correct it now & make amends to the former ee's that are being overcharged. To further research the topic, I would google it and of course - don't forget to talk to your TPA, unless you do it yourself - in that case your attorney.

    Here's the IRS info: [url]http://www.fourmilab.ch/ustax/www/t26-D-43-4980B.html[/url]
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  • PaperclipPaperclip 2 Posts
    PMVote Up0Vote Down
    Thanks for the quick and thorough response. Problem occured several years ago and has been corrected for new QBs. However, it seems like we should still square things away with the former employees adversely impacted. Do you know how far back the IRS and DOL can reach in their review of previous years?
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