What is COBRA and which employers must comply?

COBRA (Consolidated Omnibus Budget Reconciliation Act) requires employers with 20 or more employees who sponsor group health plans to offer continuation coverage to employees and dependents who lose coverage due to a qualifying event. Qualifying events include termination of employment (other than gross misconduct), reduction in hours, divorce or legal separation, death of the covered employee, and a dependent child losing dependent status.

What are the COBRA notice requirements and deadlines?

COBRA has strict notice deadlines: the employer must notify the plan administrator within 30 days of a qualifying event; the plan administrator must send the COBRA election notice to qualified beneficiaries within 14 days of receiving notice (44 days total from the qualifying event). Qualified beneficiaries have 60 days to elect COBRA coverage. Failure to provide timely notices can result in penalties of $110 per day per qualified beneficiary.

How long does COBRA coverage last?

Standard COBRA continuation coverage lasts 18 months for qualifying events related to termination of employment or reduction in hours. Coverage extends to 36 months for qualifying events related to divorce, death, Medicare entitlement, or a dependent child losing dependent status. A second qualifying event during the 18-month period can extend coverage to 36 months. Disability determinations can extend coverage to 29 months.

What can employers charge for COBRA coverage?

Employers can charge COBRA beneficiaries up to 102% of the total plan cost (employee + employer contributions) for the coverage. The 2% administrative surcharge is meant to cover administrative costs. For disability extensions (months 19–29), employers can charge up to 150% of the plan cost. COBRA premiums must be paid within 30 days of the due date (45 days for the first payment after election).

What are the most common COBRA compliance mistakes?

Common COBRA compliance failures include: missing the 44-day notice deadline, failing to notify the plan administrator of qualifying events, not offering COBRA to all qualified beneficiaries (including dependents), charging incorrect premiums, failing to maintain COBRA coverage during the election period, and not providing notice of early termination of COBRA. These mistakes can result in excise tax penalties of $100–$200 per day per qualified beneficiary.

COBRA compliance

COBRA Compliance for Employers

COBRA requires employers with 20 or more employees to offer continuation coverage to employees and their dependents who lose group health coverage due to a qualifying event. The notice requirements are strict, the deadlines are short, and the penalty for non-compliance is $110 per day per qualified beneficiary — with no cap. Most COBRA violations are administrative failures, not intentional non-compliance.

Who must comply with COBRA?

COBRA applies to private-sector employers with 20 or more employees (counting part-time employees on a fractional basis) who sponsor a group health plan. Federal employees and employees of certain church plans are covered by separate continuation coverage laws. Small employers (fewer than 20 employees) may be subject to state mini-COBRA laws that provide similar continuation rights.

Qualifying events and coverage periods

A qualifying event is an event that causes a covered employee, spouse, or dependent child to lose group health coverage. The maximum coverage period depends on the type of qualifying event and the qualified beneficiary.

Qualifying event	Max coverage	Who qualifies
Termination of employment (other than gross misconduct)	18 months	Employee, spouse, dependents
Reduction in hours below full-time threshold	18 months	Employee, spouse, dependents
Death of covered employee	36 months	Spouse, dependents
Divorce or legal separation	36 months	Spouse, dependents
Medicare entitlement of covered employee	36 months	Spouse, dependents
Dependent child loses dependent status	36 months	Dependent child
Employer bankruptcy (retiree coverage)	Life of retiree	Retiree, spouse, dependents

Notice deadlines

COBRA has six distinct notice requirements, each with its own deadline and content requirements. Missing any one of them triggers the $110/day penalty. The most commonly missed is the 30-day employer notice deadline — which starts running the moment the qualifying event occurs, not when the employer learns of it.

Initial (General) Notice

Within 90 days of plan coverage beginning

Who: Plan administrator to employee and spouse

Informs participants of their COBRA rights before a qualifying event occurs.

Qualifying Event Notice (employer to plan)

Within 30 days of qualifying event

Who: Employer to plan administrator

Employer notifies the plan administrator of a qualifying event (termination, reduction in hours, death, Medicare entitlement, bankruptcy).

Qualifying Event Notice (employee/dependent to plan)

Within 60 days of qualifying event

Who: Employee or dependent to plan administrator

Employee or dependent notifies the plan of divorce, legal separation, or dependent losing status.

COBRA Election Notice

Within 14 days of plan administrator receiving notice of qualifying event

Who: Plan administrator to qualified beneficiaries

Informs qualified beneficiaries of their right to elect COBRA, the coverage available, the premium, and the election deadline.

Notice of Unavailability

Within 14 days of receiving a request for COBRA

Who: Plan administrator to requestor

Required when a person requests COBRA but is not entitled to it.

Notice of Early Termination

As soon as practicable

Who: Plan administrator to qualified beneficiaries

Required when COBRA coverage terminates before the maximum coverage period.

COBRA premium rules

Maximum premium: 102% of the applicable premium (100% cost of coverage + 2% administrative fee). During the disability extension period, the maximum is 150%.

Payment deadline: Initial premium payment is due 45 days after the COBRA election. Subsequent payments are due on the first of the month with a 30-day grace period.

Underpayment: If a premium payment is less than the required amount by a de minimis amount (less than the lesser of $50 or 10% of the required amount), the plan must treat it as a full payment.

Rate changes: The plan may change the COBRA premium at the start of each plan year. The plan must notify qualified beneficiaries of any premium increase.

Common COBRA compliance mistakes

Missing the 30-day employer notice deadline after a qualifying event — the most common and most expensive mistake

Failing to send the COBRA election notice to the employee's last known address after termination

Not sending COBRA notices to spouses and dependents separately — each qualified beneficiary has independent election rights

Charging more than 102% of the applicable premium

Terminating COBRA coverage before the maximum period without proper notice

Failing to provide the initial general notice within 90 days of coverage beginning

Not tracking the 60-day employee/dependent notice deadline for divorce and dependent status changes

Assuming the carrier or TPA is handling COBRA administration without confirming it in writing

Check your COBRA compliance posture

The Compliance Health Check evaluates your COBRA notice procedures, administration processes, and documentation against the regulatory requirements.

Compliance Health Check ← Compliance hub