COBRA notices, deadlines, premiums and penalties for employers
Federal COBRA requires a covered employer’s group health plan to offer continuation coverage when a qualifying event would end coverage. The plan administrator sends the general and election notices, the employer notifies the administrator of certain events within 30 days, and a plan may charge up to 102 percent of the applicable premium. Penalties come from two separate tracks, an Internal Revenue Code excise tax and, for certain administrator notice failures, an ERISA court amount.
Does COBRA apply to my business?
Federal COBRA generally applies to a private-sector group health plan of an employer that had at least 20 employees on more than 50 percent of its typical business days in the previous calendar year. For COBRA, all full-time and part-time common-law employees are counted, each part-time employee counts as a fraction of a full-time employee, and self-employed individuals, independent contractors and corporate directors are not counted. For COBRA the employer includes every member of a controlled group under Internal Revenue Code section 414(b), (c), (m) or (o) and successors, so employees of related companies are counted together.
DOL’s COBRA FAQs for workers say many states have similar laws, often called mini-COBRA, that apply to health plans providing benefits under insurance contracts and may cover employers with fewer than 20 employees, and point readers to the state insurance commissioner’s office.
Who is responsible for COBRA, the employer or the plan administrator?
A group health plan subject to COBRA must have a designated plan administrator who handles continuation coverage and the notices, an employer may act as its own administrator or hire a third party, and DOL’s guide says COBRA compliance is the employer’s responsibility under ERISA regardless of who manages the plan.
That wording comes from the current web version of DOL’s employer guide. The October 2021 PDF version instead calls carrying out COBRA’s requirements the direct responsibility of the plan administrator. ERISA section 3(16) defines the administrator as the person the plan document designates and, if none is designated, the plan sponsor, which for a plan established or maintained by a single employer is the employer.
Which events trigger COBRA, and who counts as a qualified beneficiary?
The qualifying events are a covered employee’s death, termination of employment for any reason other than gross misconduct, reduction in hours, entitlement to Medicare, divorce or legal separation, and a child’s loss of dependent status, plus the bankruptcy of an employer that a covered employee retired from, and an event counts only if it causes a loss of coverage under the plan.
A loss of coverage means ceasing to be covered under the same terms and conditions as in effect immediately before the qualifying event, and any resulting increase in the premium or contribution counts, even if the loss is not immediate, according to the Treasury regulation on qualifying events. Taking leave under the Family and Medical Leave Act is not a qualifying event, and DOL’s guide says coverage maintained during FMLA leave is not COBRA continuation coverage. A qualifying event may occur when the employer’s FMLA obligation to maintain coverage ends, such as when an employee on leave decides not to return and notifies the employer.
A qualified beneficiary is an individual who, on the day before a qualifying event, is covered under the group health plan as a covered employee, the spouse of a covered employee or a dependent child of the covered employee, plus a child born to or placed for adoption with a covered employee during a period of COBRA coverage. A covered employee is a qualified beneficiary only for a termination of employment, a reduction in hours or the retiree bankruptcy event, according to the Treasury regulation on qualified beneficiaries.
Is a termination for gross misconduct a COBRA qualifying event?
A termination for gross misconduct is not a COBRA qualifying event, because the qualifying event is a termination of employment for any reason other than gross misconduct, according to the Treasury regulation. Gross misconduct is not on the list in DOL’s guide of reasons a plan may end COBRA coverage that a person has already elected.
How long does COBRA coverage last?
COBRA coverage lasts up to 18 months after a termination of employment or reduction in hours (up to 29 months with a disability extension, or up to 36 months after a second qualifying event) and up to 36 months for the other qualifying events. The Treasury regulation on duration says a plan may provide longer coverage, and the retiree bankruptcy event has its own periods.
If the covered employee became entitled to Medicare less than 18 months before the termination or reduction in hours, coverage for the spouse and dependents must be available up to 36 months after the date of Medicare entitlement.
DOL’s guide sets three conditions for the 11-month disability extension. The Social Security Administration (SSA) determines the disability before the 60th day of continuation coverage, the disability continues for the rest of the initial 18 months, and the disabled beneficiary or another person notifies the plan of the SSA determination. The extension applies to every qualified beneficiary from that qualifying event, disabled or not.
When must employees and spouses receive the general COBRA notice, and what must it say?
The plan gives each employee and spouse a general notice of COBRA rights within the first 90 days of coverage, and it can meet this by including the notice in the summary plan description.
The regulation on the general notice sets the outer limit as the earlier of two dates: 90 days after coverage begins (or, if later, 90 days after the plan first becomes subject to COBRA), and the first date the administrator must furnish an election notice to that person.
DOL’s guide says the general notice must include the plan name and a contact, a general description of the continuation coverage, what qualified beneficiaries must do to notify the plan of qualifying events or disabilities, and why keeping the administrator informed of addresses matters, plus a statement that the notice does not fully describe COBRA or the plan.
What must the employer tell the plan administrator after a qualifying event, and by when?
The employer must notify the plan administrator within 30 days after a covered employee’s termination of employment (other than for gross misconduct), reduction in hours, death or entitlement to Medicare, or an employer bankruptcy, and a plan that measures from the loss of coverage runs the 30 days from that date.
The notice must give enough information for the administrator to identify the plan, the covered employee, the qualifying event and its date, according to the regulation on the employer’s notice.
When must the election notice go out, and what must it say?
After the administrator is notified of a qualifying event it sends each qualified beneficiary the election notice within 14 days, or within 44 days after the qualifying event (or the loss of coverage, for a plan that measures from that date) when the employer is also the plan administrator and must otherwise notify an administrator of the event.
The 44-day period comes from 29 CFR 2590.606-4(b)(2). The 14 days run from the administrator’s receipt of the notice of the qualifying event, not from the termination.
DOL’s guide lists the contents of the election notice, including the plan and its COBRA administrator, the qualifying event, the qualified beneficiaries, the right to elect and how, the date coverage ends if not elected, and the premium due dates and grace periods. A plan that denies a request for COBRA coverage or an extension as not entitled must give a notice of unavailability within 14 days after the request is received.
Can we use the DOL model notices?
Single-employer group health plans can use DOL’s Model General Notice and Model Election Notice, and using them is not required. DOL offers both on its tools page.
The plan administrator fills in the blanks with the appropriate plan information, and DOL considers use of a properly completed model good faith compliance with the content requirements for that notice. The regulations on the general notice and the election notice say use of the model, appropriately modified and supplemented, is deemed to satisfy the notice content requirements.
What must employees and their families tell the plan, and by when?
The covered employee or a qualified beneficiary must notify the plan of a divorce, legal separation, a child’s loss of dependent status or a second qualifying event, and the plan can set a deadline for that notice but not one shorter than 60 days.
DOL’s guide counts the 60 days from the latest of the date of the event, the date coverage is or would be lost, or the date the person is told, through the summary plan description or the general notice, of the responsibility and the procedures.
The employer or plan administrator sets reasonable procedures for receiving these notices, and the regulation deems them reasonable only if they are described in the summary plan description, name the person or entity designated to receive notices, say how notice may be given, describe the information the plan needs, and meet the regulation’s time and content limits.
How long do qualified beneficiaries have to elect COBRA, and when are payments due?
Each qualified beneficiary has at least 60 days to elect, counted from the later of the date the election notice is provided and the date coverage would otherwise be lost, and the plan must allow at least 45 days after the election for the first premium payment. For each later payment the plan must provide a minimum 30-day grace period, and it can end coverage if full payment is not received before the grace period ends.
An election is made on the date it is sent to the plan administrator, and payment is considered made on the date it is sent to the plan, according to the election regulation and the payment regulation. A plan cannot require a premium when the beneficiary makes the election, and it can terminate the beneficiary’s COBRA rights if the beneficiary does not pay before the initial 45-day period ends. If the beneficiary elects and pays where required, coverage must be provided from the date coverage would otherwise have been lost.
A plan must allow payment in monthly installments and, per DOL’s guide, is not obligated to send monthly premium notices.
Can we hold final pay or severance until a former employee waives COBRA?
An employer cannot withhold anything a qualified beneficiary is otherwise entitled to by law or other agreement, such as final pay or severance that is owed, to compel payment for COBRA or to coerce the beneficiary into giving up COBRA rights, including the right to use the full election period. Such a withholding is a failure to comply, and a waiver obtained that way is invalid, according to the Treasury regulation on the election period.
What if a COBRA payment comes in a little short?
A timely payment that falls short by no more than the lesser of $50 or 10 percent of the amount the plan requires satisfies the requirement unless the plan notifies the beneficiary of the deficiency and gives a reasonable time to pay it, and 30 days after the notice is deemed reasonable. The regulation lets the Commissioner provide a different dollar amount in published guidance. As of October 2026, the regulation text states $50.
How much can we charge for COBRA coverage, and when can the premium change?
A plan may charge up to 102 percent of the applicable premium, which DOL words as the full cost of the coverage plus a 2 percent administration charge, and up to 150 percent during the 11-month disability extension for coverage that includes the disabled qualified beneficiary.
The applicable premium is the cost to the plan of coverage for similarly situated beneficiaries who have not had a qualifying event, whether the employer or the employee pays that cost. For a self-insured plan, the statute uses a reasonable actuarial estimate of that cost, unless the administrator elects its past-cost method, which is unavailable after a significant change in coverage or employees covered. The 102 percent and 150 percent figures are maximums, and DOL’s guide says a plan can choose to provide continuation coverage at reduced or no cost.
Plans generally must fix the applicable premium before each 12-month determination period begins, and the regulation allows an increase during a period in only three cases. They are that the plan had charged less than the maximum and the new amount does not exceed it, that the increase occurs during the disability extension and does not exceed the 150 percent limit, or that a qualified beneficiary changes the coverage being received.
When can we end COBRA coverage early?
DOL’s guide says a plan may end COBRA coverage before the end of the maximum period when premiums are not paid in full on a timely basis, the employer ceases to maintain any group health plan, a qualified beneficiary begins coverage under another group health plan or becomes entitled to Medicare after electing COBRA, or a qualified beneficiary engages in fraud or other conduct that would justify terminating coverage of a similarly situated participant not receiving COBRA.
Under the Treasury regulation, the other-coverage reason applies only if the beneficiary is actually covered, not merely eligible, the coverage began after the election, the other plan is not maintained by the employer that maintains the COBRA plan, and the other plan has no preexisting condition exclusion or limitation for the beneficiary. The Medicare reason applies only if entitlement, meaning the effective date of enrollment in Part A or B, whichever is earlier, comes after the election.
When a plan decides to end coverage early, it must give the qualified beneficiary a notice of early termination as soon as practicable after the decision is made, describing the date coverage will end, the reason and any rights to elect other group or individual coverage. DOL’s guide says this includes ending coverage for nonpayment.
Must COBRA coverage match what active employees get?
COBRA coverage must be identical to the coverage available to similarly situated people who are not on COBRA, so changes the plan makes for active employees also apply to qualified beneficiaries.
A qualified beneficiary receives the same benefits, choices and services as a similarly situated participant, including the right during an open enrollment season to choose among available options, and is subject to the same plan rules, limits and claims and appeals process, according to DOL’s guide. If the coverage offered differs in any way from what similarly situated non-COBRA beneficiaries have, it is not COBRA continuation coverage, and the plan is not in compliance unless COBRA-qualifying coverage is also offered, according to the regulation on identical coverage.
How are COBRA premiums that we pay treated for payroll, and does the American Rescue Plan subsidy still apply?
IRS Publication 15-B (2026) says the accident and health benefits exclusion from employee wages applies to amounts an employer pays to maintain medical coverage for a current or former employee under COBRA, whether the employer pays the premiums directly or reimburses the former employee.
A 2 percent shareholder of an S corporation is not treated as an employee for the exclusion, so the value is included in wages subject to income tax withholding but can be excluded from social security, Medicare and FUTA wages. All or part of the amounts paid to highly compensated employees under a self-insured medical reimbursement plan that favors them are included in box 1 of Form W-2.
The federal COBRA premium assistance under section 9501 of the American Rescue Plan Act was temporary, and IRS Notice 2021-31 says the assistance will not be available for periods of coverage beginning after September 30, 2021. An employer may choose to pay part or all of COBRA premiums on its own, and DOL’s employers FAQ says a third party may also pay.
What is the IRS excise tax for a COBRA failure?
The Internal Revenue Code imposes an excise tax of $100 for each day in the noncompliance period for each qualified beneficiary affected by a COBRA failure, with a limit of $200 a day when more than one qualified beneficiary has the same qualifying event, and the statute provides relief and caps for failures due to reasonable cause.
As of November 2026, section 4980B sets these amounts. The noncompliance period begins when the failure first occurs and ends on the earlier of the date the failure is corrected or 6 months after the last day of the maximum coverage period for that qualified beneficiary. The tax reaches notice failures too, because it applies to a failure to meet the requirements of subsection (f), which includes the notice requirements.
If failures are not corrected before a notice of examination of income tax liability is sent to the employer and they occurred or continued during the period examined, the tax for a qualified beneficiary is not less than the lesser of $2,500 or the tax that would otherwise apply. Where the employer’s violations for a year are more than de minimis, $15,000 is substituted for $2,500 for the employer.
IRS Form 8928 reports the tax and is filed by any employer, group health plan, plan administrator or plan sponsor liable for it.
How can the COBRA excise tax be reduced, and who owes it?
Internal Revenue Code section 4980B removes or caps the COBRA excise tax in several situations, and it makes the employer liable for the tax on a plan that is not a multiemployer plan.
No tax applies for any period in which none of the liable persons knew, or exercising reasonable diligence would have known, that the failure existed. No tax applies if the failure was due to reasonable cause and not willful neglect and is corrected within the 30-day period beginning on the first date any liable person knew or would have known. For failures due to reasonable cause and not willful neglect, the tax for a taxable year of an employer with a single-employer plan cannot exceed the lesser of 10 percent of the aggregate amount the employer paid or incurred in the preceding taxable year for group health plans, or $500,000.
A failure counts as corrected only if it is retroactively undone to the extent possible and the qualified beneficiary is placed in as good a financial position as if it had not occurred. In addition, each person responsible, other than as an employee, for administering or providing benefits under the plan whose act or failure to act caused the failure is liable. A person who is not the employer is liable only if it assumed responsibility for the act under a legally enforceable written agreement, with an exception where the person covers similarly situated active beneficiaries and is asked in writing to extend the same coverage, according to section 4980B.
What can a court order under ERISA for COBRA notice failures?
ERISA lets a court hold a plan administrator that fails to give the general notice or the administrator’s notices of rights personally liable to the participant or beneficiary for up to $100 a day, which DOL’s regulation sets at up to $110 a day for violations after July 29, 1997.
The amount is in the court’s discretion, and each violation with respect to any single participant is a separate violation, under ERISA section 502 and 29 CFR 2575.502c-1. The statute lists the administrator’s notices, not the employer’s notice to the plan administrator or the qualified beneficiary’s notices.
As of October 2026, the figure in the regulation is up to $110 a day. DOL’s 2026 notification, published and effective May 27, 2026, is a notification of no inflation adjustment.
ERISA also gives certain parties, including qualified beneficiaries and the Department of Labor, the right to file a lawsuit to redress noncompliance, according to the Treasury regulation.
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