Former EE is on COBRA and subsequently designated an AEI due to involuntary termination of employment. They pay the 35% of premium for 1 month but do NOT submit their AEI form certifying they meet the 5 eligibility statements. Now they are terminated for nonpayment of premium and we have been unsuccessful in reaching them.

Is the employer obligated to "hunt down" the AEI form from someone who has paid their 35% and is otherwise eligible due to involuntary termination?

If we cannot reach this person, and we are obligated to ensure receipt of the AEI form, should we charge them 100% of the premium, apply their 35% payment to that amount and adjust their termination date?

I partially found the answer.

According to the Treasury (informally), if an employer provides the subsidy and claims the tax credit without confirming if the COBRA participant is eligible for other coverage, the employer will be considered to have properly claimed the credit. However, if the employer has knowledge of a participant's eligibility for other coverage, it must disallow the subsidy.

It is still an open question if the employer has an obligation to "affirmatively investigate" whether the participant is eligible for other coverage.

Source - Miller Chevalier, 4/30/09