If your business has 20 or more employees and offers group health insurance, COBRA compliance isn’t optional—it’s a legal obligation. The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers to offer continuation coverage when employees lose group health coverage due to certain qualifying events.
Even if you’ve handled COBRA for years, the process can be complex. Employers often trip up on two key areas: timely notifications and COBRA-related releases.
COBRA Notice Requirements
Under COBRA, employers must notify their plan administrator of a qualifying event (e.g., termination, reduction in hours, death, or divorce) within 30 days. The administrator then has 14 days to notify the affected individual of their COBRA rights. If you both sponsor and administer the plan, the combined deadline is 44 days from the date of the qualifying event.
Missed or delayed notices can trigger penalties of up to $110 per day per participant. Even more costly? A potential lawsuit from a former employee claiming they were never notified.
To reduce risk:
- Track and document the date COBRA notices are mailed.
- Retain proof of mailing or delivery.
- If using email, follow electronic delivery rules and obtain consent in advance.
Can You Request a Release in Exchange for COBRA Premium Help?
While you can’t require a former employee to sign a legal release in exchange for COBRA coverage, you can offer incentives to encourage it.
For example:
- Offer to pay part or all of the COBRA premium if the employee signs a release of employment-related claims.
- Propose an alternative coverage option (e.g., four months of employer-paid health insurance) that’s conditional on signing a release, in lieu of COBRA.
Keep in mind:
- The employee retains the right to elect COBRA within the 60-day election window, even if they accept alternate coverage.
- You must still provide the full COBRA election notice. If not, any waiver of rights could be deemed invalid.
- Once the alternative coverage ends, a second COBRA election isn’t required, assuming the original notice was sent.
This approach can limit legal exposure, but it must be handled carefully. Always consult legal counsel before offering any release-based alternatives.
Stay Compliant, Avoid Costly Mistakes
Health benefits are essential to attracting and retaining talent, but noncompliance with COBRA rules can lead to steep financial and legal consequences. We can help assess your compliance practices, identify cost-saving opportunities, and support documentation efforts.
Contact us to review your COBRA procedures and ensure your organization remains protected.
©2026