COBRA or No COBRA

Finding out whether the employees of your company are subject to COBRA can be confusing. COBRA is the Consolidated Omnibus Budget Reconciliation Act which gives workers and their families who lose their health benefits the right to chose to continue group health insurance benefits provided by their group health plan for limited periods of time under certain circumstances. Visit the U.S. Department of Labor website for more information on COBRA. To review the Texas mini-COBRA statute and its application, click here.

When does COBRA Apply. First, you have to determine if your company has 20 or more employees. The Department of Labor rules for measuring employees is whether you "employed at least 20 employees or more on more than 50% of a typical business day during a previous calendar year." If yes, you are subject to COBRA. Don't assume, make the calculation.

Counting Employees. Having an accurate count of employees is critical. First, ensure the count is of employees and not merely plan participants. Account for all employees, regardless of full or part-time status. When counting, make sure you include all common-law employees. For instance if you recognize someone working for you as an independent contractor, but legally the factors are such that this person is in fact an employees, he or she will be counted as such for COBRA purposes. If your company increases its workforce at certain times during a calendar year, consult either counsel or the IRS obligations on COBRA obligations in that event.

Avoid Significant Consequences. While generally the principle of counting employees for COBRA purposes is relatively straightforward. The ramifications of noncompliance however can include lawsuits, excise taxes, and penalties.