News & Insights

HR Best PracticesFeaturedDocument RetentionApril 27, 2012by Stanton LawReady for your COBRA Audit?

The 1986 Consolidated Omnibus Budget Reconciliation Act  (“COBRA”) requires certain employers’ group health insurance plans to offer qualified beneficiaries (including employees, former employees, and certain dependents) the opportunity to continue health insurance despite events (such as termination) that would otherwise result in the loss of coverage.   Information on employers’ and employees’ rights and obligations under COBRA can be found here:  Compliance with COBRA is not difficult (even if not straightforward), and most employers are familiar with its day-to-day requirements.

Employers, however, may be less acquainted with COBRA’s recordkeeping mandates and what questions they may face if they’re unfortunate enough to be subjected to a COBRA compliance audit by the Internal Revenue Service.

The IRS – always anxious to help – last month released new procedures for it agents assigned to auditing COBRA compliance (publically available at  The new “Audit Techniques” can be used by enterprising employers to self-check their compliance and prepare for when the Feds come knocking.

Less ambitious HR and Benefits Coordinators, though, may just want the highlights, in which case consider that the IRS during an audit may request:

  • A copy of the COBRA procedures manual;
  • Copies of standard COBRA form letters sent to qualified beneficiaries;
  • A copy of the internal audit procedures for COBRA coverage;
  • Copies of all group health care plans;
  • Details pertaining to any past or pending lawsuits filed against the employer for failing to provide appropriate COBRA coverage; and
  • Records of qualifying events in the year(s) under examination, records as to how notices and elections were handled, employment tax returns, and/or lists of all enrolled individuals (including spouses and dependent children).

How much fun is that, really?