If you're running your own back-office and offering benefits to your contractors, it is critical that you are familiar and compliant with COBRA. COBRA, which stands for The Consolidated Omnibus Budget Reconciliation Act, was enacted in 1986. It requires employers with more than 20 employees to offer continuation of health care coverage when an employee loses coverage due to status changes, such as resigning, losing a job, or having hours reduced.

In addition to requiring employers to offer continuation coverage, there are numerous notification requirements that come with COBRA.  For instance, you must send a notice to employees explaining their COBRA rights when they first come onto your plan, and you must send another notice when they lose coverage so that they know how to elect COBRA.

The Department of Labor AND the IRS regularly conduct COBRA audits (and of course enforce penalties), so this is not something you want to get wrong.  The IRS is actually making it easier to comply by publishing a checklist of items it reviews during its COBRA audits, according to Infinisource, which is the third party COBRA administrator that Top Echelon Contracting uses. This checklist, which is called "Audit Techniques and Tax Law to Examine COBRA Cases (Continuation o... explains:

• Which documents the IRS typically reviews in an audit.
• How the excise tax for noncompliance is calculated and applied.
• How election waivers work.
• Key definitions.

If you are running your own back-office and are required to offer continuation coverage under COBRA, you may want to check this out.  You may also want to point this out to your clients who have to comply with COBRA.

Debbie Fledderjohann is the President of Top Echelon Contracting, Inc.