IRS Form 8928 – Employers are now required to self report COBRA Administration Compliance Failures
If the American Recovery and Reinvestment Act wasn’t enough to make employers reexamine their trust relationship with their COBRA administrator, the IRS Form 8928 reporting requirements should certainly do so. Beginning with the 2010 Plan or taxable year, employers are now required to self-report their failures to comply with COBRA, HIPAA, and other health plan regulations to the IRS on Form 8928 and pay excise taxes and penalties for these compliance failures.
If you’re not familiar with Form 8928, the instructions for the Form can be found on the IRS website here www.irs.gov/pub/irs-pdf/i8928.pdf, and the Form itself can be found here www.irs.gov/pub/irs-pdf/f8928.pdf.
While the penalties for failing to comply with COBRA have always been there, now employers can’t cross their fingers and wait for a potential IRS audit or lawsuit to uncover them – they have to self-report them. Furthermore, interest begins accruing on all excise taxes and penalties the moment they are due if they are not paid on time, so a failure to report failures to comply will start to become very expensive quickly.
What does this mean for employers who outsource their COBRA compliance administration to a professional administrator? It means employers better have a way to effectively review and audit the work performed on their behalf, and it better be a “real time view.” The old fashioned “black box” method of providing outsourced COBRA administration where employers report Qualifying Events to their administrator by fax or file and then hope that the administrator does their job is no longer a viable model. Employers should have real-time access to all QB records including access to the letters their administrator has sent to each QB. Employers should also have access to real-time reports detailing letters sent to verify that all new hires and new Qualified Beneficiaries reported to the administrator resulted in the appropriate letters being sent and sent in a timely fashion. Only through this kind of transparent view into their administrator’s world can any employer confidently report on their Form 8928 that they have had no compliance failures. Waiting for paper reports at the end of the month simply does not provide employers the data they need in the time frame needed to ensure their compliance. If you are an employer or group health plan sponsor who must comply with COBRA and your COBRA administrator is not providing you real-time, secure (always remember PHI) web-based access to your QB records and the reports you need, it is time (right now) to find a new COBRA administrator who will. For assistance you can reach us at email@example.com or call your account manager.