Tuesday May 12th, 2015
In late 1988, Congress passed TAMRA (Technical and Miscellaneous Revenue Act of 1988) which provided guidelines for judging an employer’s COBRA compliance. By meeting the TAMRA guidelines beforehand, an employer stands a strong chance of being judged in a favorable light by the IRS, thus potentially avoiding COBRA’s harsh penalties.
The four TAMRA guidelines
1. Have the individuals responsible for COBRA compliance been trained?
2. Have written instructions for administering COBRA been prepared?
3. Has the program been designed and updated based on competent professional advice?
4. Is the program monitored by independent auditors?
The compliance program
TAMRA refers to the compliance program. The COBRA compliance program includes all aspects of COBRA compliance including notification procedures, notice language, monitoring COBRA time frames, consistency in applying COBRA provisions, accurate calculation of premium rates and adherence to COBRA terminating events (meaning no COBRA participant was cancelled for reasons other than those specifically listed in the law), etc.
Proper and timely review and handling of these items may very well prevent a compliance failure and the resulting penalties. If your company utilizes a third party administrator that provides reports, you should use them as an auditing tool to find discrepancies and report them right away.
IRS will judge COBRA failure as either reasonable cause or willful neglect
A COBRA failure can be deemed reasonable cause if TAMRA guidelines are incorporated and the violation is corrected within 30 days. Penalties are more likely to be waived in cases of reasonable cause than willful neglect.
A COBRA failure can be deemed willful neglect if TAMRA guidelines are not incorporated or violation is not corrected within 30 days.
Excise tax imposed by the IRS
The IRS is responsible for auditing employers and issuing penalties if an employer does not comply with COBRA’s continuation health coverage requirements. COBRA includes an excise tax penalty of $100 per day, per violation, for noncompliance with COBRA ($200 per day if more than one beneficiary is in a family).
Annually, the IRS audits thousands of health plans regarding compliance, including COBRA. Employers would be wise to follow the TAMRA guidelines and possibly avoid noncompliance penalties.