COBRA Procedures Manual

[Guest Janet Hartfield]

I was just informed by my CFO that we are being audited by the IRS. Among other things, they are requesting us to provide our COBRA Procedures Manual when they visit. We don't have a "Procedures Manual", but have always followed the same guidelines that our agent uses with his other clients. Where can I get some help on this? Obviously, I need this information quickly.

[Guest RandyN]

COBRA regs require "cobra companies" to maintain a manual outlining how they administer COBRA.If your agent has been assisting you with the adnministration,it would be a good question to ask them. I would also ask if they have errors and omissions insurance. You might be able to get something quick from a TPA,erisa attorney or cobra administration company. Good Luck.

[Guest RandyN]

I just found the other info I was looking for . Try a website www.ebia.com. We use their COBRA manual and you may be able to get some help from them.

[Guest BENEFISH]

RandyN, what is a "cobra company"? Is this a company/employer subject to COBRA? Is it a COBRA TPA? My understanding is that the COBRA regs don't actually require a procedures manual; however, the IRS is looking at the maintenance of such a manual as an indicator of proper understanding of administrative requirements and a tool to assure consistency in administration. Can you provide a cite to the regs that require a procedures manual for "cobra companies"? Even the Thompson manual that Kirk likes so much (as do I) recommends (rather than citing a requirement for) a procedures manual. I have done one for our company, but I really don't know if it does the trick or not. I would like to know if there is a standard that we all can use to make sure the IRS doesn't send us all to jail.

[Guest Gwen Vample]

The IRS has an examination users guide that agents use in investigating COBRA compliance, and one of the items on the guide's list is to ask for the "COBRA procedures manual." Basically, the IRS wants whatever written materials you have that show how you administer COBRA.

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Gwen Vample, editor

Mandated Health Benefits The COBRA Guide

Thompson Publishing Group

[Guest Jenny Littlejohn]

As a result of the audit of our COBRA compliance program, BMI Audit Services prepared an excellent COBRA procedures manual that was customized to our exact procedures. You can contact them at www.cobraaudit.com.

[Guest Regina Lightner]

We just had our COBRA audit completed yesterday. We also lacked a procedures manual which was pointed out in the audit report. A draft of a procedures manual has been prepared by the auditor and looks excellent! Having had nothing in the past, it sure feels good knowing we won't have to worry about that much longer. Thanks to Jenny Littlejohn who recommended BMI Audit Services for the audit. I would also recommend the Thompson Mandated Health Benefits (The COBRA Guide)as the most comprehensive and useful COBRA reference resource. E-mail me if you want more information.

[Guest Janet Hartfield]

As a follow up to anyone else who may be audited in the future, the IRS performed their compliance audit last week. The IRS field agent knew much more about COBRA than our insurance broker said she would. I am confident though, that the Procedures Manual and other materials we just had developed were impressive to her. I was well prepared for everything she requested. Thank you to Janet and Regina for their recommendation of BMI Audit Services.

[Guest Rich L]

Ms. Littlejohn, what were the costs associated with your COBRA audit and procedures manual? Was the audit worth it?

[Guest BENEFISH]

Rich L, as a recent convert to having my company’s COBRA program audited (thanks in part to this site), my decision was based on these beliefs:

1. IRS / DOL discovers my firm’s COBRA errors: $xxx,xxx

2. Plaintiff discovers my firm’s COBRA errors: $x,xxx,xxx

3. www.cobraaudit.com (or benefit attorney) discovers my firm’s COBRA errors: $xxx - $x,xxx

Most competent HR types responsible for their organization’s COBRA compliance have a good idea of what (or what not) to do on a day-to-day basis. These audits / reviews are more for peace of mind and maintaining consistency with the law’s rules. The BENEFISH is hooked.

[Guest Jenny Littlejohn]

Rich L, I'm sorry it has taken me so long to reply to your direct question. My medical leave lasted longer than even I anticipated.

The cost of our COBRA audit and procedures manual was less than $2,000 and was unquestionably worth every penny. Frankly, we expected to have to pay a lot more. We feel much better prepared to administer COBRA and to defend ourselves against the wolves at the IRS. Also, we elected to purchase annual access to the auditor's technical staff for tough questions that come up rather than continue to rely on less-informed staff at our broker's agency.

[Guest Rich L]

Are there any other firms that perform these COBRA audits other than BMI Audit? $1200 - $1500 for a review of my forms and procedures seems pretty steep. Please post any other companies for comparison. Thank you in advance.

[Guest BENEFISH]

If that amount is "steep" for you, I wonder if you have enough employees to even be subject to COBRA. We pay more than that to have light bulbs replaced. My personal experience with BMI is that they provided much more value than their fee reflected. There is certainly a lot more to the audit than a simple review of your forms. I don't think you will find a better deal myself.

[Guest Jenny Littlejohn]

Rich L, I have to agree with Mr. Benefish. My company, which is certainly not very big, pays much more than $1500 for many HR related services with less long-term benefits (or quality). With some of the “tricky” COBRA events that have occurred in my company recently, I feel very fortunate to have BMI Audit Services as a vendor.

I am sorry if I have offended anyone with my glowing endorsement. I just feel that good, quality vendors should be recommended.

[Kirk Maldonado]

Jenny:

I don't think you need to apologize. One of the advantages that the message boards offer is that we can exchange our views as to the quality of services that we are receiving from vendors. I think that honest feedback, whether positive or negative, is very useful information to everybody that reads the message boards.

[Guest Rich L]

Benefish, Jenny and Kirk: Thank you for your responses to my recent post. Your points are well taken. Based on persuasion by my HR Manager, as well as your comments and the positive references provided by the above mentioned vendor, now is probably as good a time as any to have our COBRA system reviewed.

I have read in several recent publications, the need to review COBRA documentation, procedures, etc. related to the upcoming effective date for Final COBRA regulations. Thanks again.

[Guest mls]

I would like to chime in here and ask for other recommendations for COBRA Audit Services. We are a large company with over 20,000 on our medical plan and over 1,000 on COBRA. We have reviewed BMI's sample audit reports and while their services may be advantageous to a smaller company who does not know very much about COBRA, we are pretty sophisticated and need a little more meat in an audit. Any suggestions?

[Guest BENEFISH]

mls, Last I checked, meat is sold by the pound. When I have worked with BMI, I feel like I got a standing rib roast and paid for hamburger. My first impression of BMI was somewhat similar to yours, but I have worked with them now and I don't know any other vendor who is as knowledgeable and professional. Maybe the report you reviewed was prepared for a smaller client. Our plan covers about 9,000 employees in over 50 locations. We're not unsophisticated. They did a nice job of pointing out the mistakes we were not making (wink).

[GBurns]

To MLS: 20,000 employees is not much. I have many clients who have more than that and I still dont think that they are big. If you ask COBRA Services thay will give you the names of their larger clients.

[This message has been edited by Brigid Anderson (edited 11-23-1999).]

[Guest Amy Mlot]

Can anyone offer some advice? I work for a small agency, 120 employees, and the administrators require payment for COBRA by the first of the month following termination of employment. I am giving my 2 weeks notice on Monday and want to know what I can do. Is it legal for them to ask for this?

[GBurns]

Insurance premiums are payable in advance. This is mid November, which means that the last premium was paid in early Nov for the month of Nov, if you leave before Dec how else would Dec premium be paid? It seems that the employer has no other alternative. As to legality, as far as I have ever seen it is not only legal, it is the only logical thing to do. By the way, every time I have seen or heard of someone giving notice, they were asked to leave immediately. Before they surprise you with this action, check out their usual behaviour, in the past, when they are given notice. Good luck.

[Linda]

ERISA Section 602(3) states that an employer cannot require a qualified beneficiary (like a former employee) to pay the first COBRA premium before the 45th day after the qualified beneficiary's COBRA election. And, under ERISA Section 605, a qualified beneficiary has 60 to make his or her COBRA election. So, a qualified beneficiary can have over 3 months before he or she makes the first payment. This is one of the aspects of COBRA that really bothered employers -- way back when COBRA first employers (except possibly your soon-to-be former employer) have accepted it and follow the law.

[Guest bradecki]

Linda is right, you have 45 days from the day you elect to make you first premium payment. If you wait the entire 60 days you have to elect and another 45 days to pay...you will owe 3 months of premium, so make you you are prepared to send that much if you wait that long. I have taught COBRA classes for 10 years and Linda is also right that this drives employers crazy, but there is nothing they can do about it. email me if you have any other questions.

rearadecki@aol.com

[Guest EMK]

Just a word for a couple of thousand dollars for a COBRA audit/review. Think of it as the approximate cost of a day or two in the hospital. If your company erroneously covered someone under COBRA for a couple of days, and they were in the hospital,.... Also, if the COBRA-eligible were inappropriately not offered COBRA and ended up with expenses, you can be sure someone (e.g., the COBRA-eligible, the hospital, Medicaid) will pursue getting the COBRA coverage.

[Guest ScottN]

I agree with EMK. Add to the potential medical cost the cost of $100 per day per QB for non-compliance and the tab can reach a quite costly level in a short period of time.

[This message has been edited by Brigid Anderson (edited 11-23-1999).]

[Greg Judd]

To add a bit of statistics to the "20,000 lives/employees are not that many" sidebar, BLS (federal Bureau of Labor Statistics, for acronym-ophobes) reports that as of 1992 (latest available figures), just 668 US employers have even 10,000 + employees, compared with a total of over 4,600,000 US businesses of all employment sizes. The number with 10,000+ is about 0.15% of all enterprises.

So, 20,000 employees/lives is a relatively unusual business situation.

[This message has been edited by Brigid Anderson (edited 11-23-1999).]

[Brigid Anderson]

I apologize that, due to time constraints in the last two weeks, I haven’t been carefully reading all the posts in this topic. Now that I have, I would suggest (as moderator of this message board) that we don’t need to hear any more on the "how large is large" issue.

mls: thank you for your remarkable self-restraint in not responding to comments from Gburns. I hope it continues to hold . . .

Everyone else: please be polite when posting messages on this board. We must disagree with each other, of course. That is what makes it a useful exercise. But our focus here is on content not personalities. Therefore, please confine your disagreement to what is being said—do not characterize the person saying it or question their motives.

Also note that I have edited or deleted the posts that prompted this message.

[This message has been edited by Brigid Anderson (edited 11-23-1999).]

[Guest dennis london]

quote:

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Originally posted by Linda:

ERISA Section 602(3) states that an employer cannot require a qualified beneficiary (like a former employee) to pay the first COBRA premium before the 45th day after the qualified beneficiary's COBRA election. And, under ERISA Section 605, a qualified beneficiary has 60 to make his or her COBRA election. So, a qualified beneficiary can have over 3 months before he or she makes the first payment. This is one of the aspects of COBRA that really bothered employers -- way back when COBRA first employers (except possibly your soon-to-be former employer) have accepted it and follow the law.

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