The Most Common COBRA Administration Mistakes and How to Prevent Them

9/3/2026

The most common COBRA administration mistakes are missed or late notices, miscounted deadlines, wrong eligibility decisions, premium errors, and coverage terminated without a valid reason or proper notice. Almost all of them trace back to three root causes: nobody owns the handoff between HR and the administrator, deadlines are counted from the wrong trigger, and nothing is documented well enough to prove what happened. The penalties are per day and per person, so small process gaps get expensive.

Why COBRA Errors Are Costly

Most COBRA violations are measured in days. A notice sent three weeks late isn't a single mistake. It is three weeks of noncompliance for every qualified beneficiary who should have received it, and exposure can build for months before anyone notices. Three kinds of exposure stack up:

• ERISA statutory penalties. A court may impose a daily penalty on a plan administrator who fails to provide a required notice.
• Internal Revenue Code excise tax. An excise tax applies per qualified beneficiary for each day of noncompliance and is self-reported on Form 8928.
• Medical claims. The biggest risk is often a court ordering the employer to pay the medical bills a former employee ran up after coverage was wrongly denied or cut off. One hospital stay can outweigh years of statutory penalties.

For a fuller treatment of enforcement, see penalties for COBRA violations.

Mistake 1: Nobody Tells the Administrator

When a third-party administrator (TPA) sends COBRA notices, it can only act on events it hears about. The employer has 30 days to notify the plan administrator of a termination, reduction in hours, death, or Medicare entitlement. The most common failure isn't the TPA missing its 14-day deadline. It is HR never sending the termination to the TPA at all, often because the employee was terminated in the HRIS but the benefits feed failed or a manual step was skipped.

Prevention: Make COBRA notification a required step in the offboarding checklist, and run a monthly reconciliation of terminations and hours changes against the TPA's list of events received.

Mistake 2: Missing Reductions in Hours

Terminations are easy to see. Reductions in hours that cost an employee eligibility are not: a move from full-time to part-time, a variable-hour worker who falls below the plan's threshold, or a switch to a job class not eligible for the plan. Each one is a qualifying event.

Prevention: Have payroll or HRIS flag any status change that ends benefit eligibility, not just separations.

Mistake 3: Counting From the Wrong Date

COBRA deadlines run from different triggers. The election period runs from the later of the loss of coverage or the date the election notice is provided. The initial premium is due 45 days after election, not after the qualifying event. Administrators who count everything from the qualifying event cut deadlines short and terminate people who paid on time.

Prevention: Record each trigger date separately in the COBRA file and calculate each deadline from its own trigger.

Mistake 4: Leaving Out Spouses and Dependents

Each qualified beneficiary has an independent election right. Common errors include:

• Addressing the election notice only to the employee when a spouse lives at a different address.
• Treating the employee's waiver as binding on the family.
• Failing to notice a divorce or a child aging out because nobody told the plan.

Prevention: Send a separate notice when a spouse or dependent is known to live elsewhere, and explain clearly in the general notice that beneficiaries must report divorce, legal separation, and loss of dependent status within 60 days.

Mistake 5: Denying COBRA for "Gross Misconduct" Without Evidence

Termination for gross misconduct is not a qualifying event, but the term isn't defined in the statute, and courts read it narrowly. Poor performance, absenteeism, and ordinary policy violations generally don't qualify. An employer that denies COBRA on this basis has to be ready to prove it.

Prevention: Offer COBRA unless the misconduct is serious, well documented, and reviewed by counsel.

Mistake 6: Premium Errors

• Charging more than 102% of the applicable premium, or more than 150% outside a disability extension.
• Rejecting a payment that is short by an amount that isn't significant. That means the lesser of $50 or 10% of the required premium. The plan must treat it as full payment or give notice and a reasonable period (30 days) to pay the difference.
• Terminating based on the date a payment was received rather than the date it was sent.
• Not updating premiums when the plan's rates change at renewal.

Prevention: Keep the premium calculation and the shortfall rule in writing, and keep postmark or electronic timestamp evidence for every late-period payment. See COBRA premium payment management.

Mistake 7: Treating COBRA Enrollees as Second-Class Participants

COBRA coverage must be identical to the coverage active employees in the same group receive. That includes open enrollment rights, plan changes, and the ability to add a newborn or adopted child. Leaving COBRA enrollees out of the open enrollment mailing is a quiet but real violation.

Mistake 8: Getting the FMLA Interaction Wrong

Taking FMLA leave is not a qualifying event, because the employee keeps health coverage during leave. The qualifying event generally occurs when the employee fails to return at the end of leave. Sending COBRA notices when FMLA leave starts, or dropping coverage then, creates problems under both laws. See handling COBRA qualifying events with FMLA leave.

Mistake 9: Outsourcing Without Oversight

Hiring a TPA moves the work, not the liability. The employer usually remains the plan sponsor, and often the plan administrator, for ERISA purposes.

Prevention: Review the service agreement for who owns each notice, request periodic reports on events received and notices sent, and spot-check a sample of files every year.

Mistake 10: Records That Cannot Prove Compliance

In a dispute, the plan has to show that a specific notice went to a specific person on a specific date. Saying "our system sends these automatically" doesn't prove anything about one notice.

Prevention: Keep a copy of each notice, the address used, the mailing date and method, and the mailing log or certificate of mailing.

Two other errors come up often enough to watch for: ending coverage for reasons the rules don't permit (covered in early termination of COBRA coverage) and applying COBRA to a plan that is actually exempt, or failing to apply it to one that is not (see which employers are subject to COBRA).

Frequently Asked Questions

Who is liable when the TPA makes the mistake?

The employer and plan administrator generally remain responsible to participants. The TPA contract decides whether you can recover costs from the TPA, so read its indemnification terms.

Can we fix a missed notice after the fact?

Yes, send it as soon as the error is found, with a full election period from that date. A late notice limits the damage. It doesn't erase the penalty exposure for the delay.

Is a small employer exempt from these penalties?

Employers not subject to federal COBRA aren't subject to its penalties, but state continuation laws may apply with their own enforcement.

How often should we audit COBRA files?

At least once a year, and after any change in TPA, HRIS, or insurance carrier, since data feeds tend to break at those points.

Related Reading and Training

For the full workflow, see the COBRA administration process, step by step. To train the people who run it, see the COBRA training and certification program and COBRA administration requirements training.