December and January are peak renewal months for group health plans, and the period when Consolidated Omnibus Budget Reconciliation Act (COBRA) administration is most likely to break down. When an employer finalizes new premiums, changes carriers, adds or drops plan options, or switches administrators, those changes have to reach the COBRA administrator before they take effect. When that handoff does not happen on time, qualified beneficiaries enter the new plan year on stale rates or outdated enrollment records, and the employer carries the compliance exposure.
The mechanics work like this: under federal COBRA rules, qualified beneficiaries have the same open enrollment rights as similarly situated active employees. That means when a plan changes at renewal, the COBRA administrator needs current plan information, updated premium rates, and any new enrollment options in time to give beneficiaries a meaningful opportunity to elect or adjust coverage. An employer that finalizes its 2027 plan design but delays notifying the administrator can leave COBRA participants receiving notices with incorrect rates or no notice of available plan changes at all.
Sending a COBRA election notice with the wrong premium is a compliance failure under IRC Section 4980B, which imposes an excise tax of $100 per affected qualified beneficiary per day for each day the noncompliance continues. Where more than one family member is affected, that rises to $200 per day per family. A separate penalty of up to $110 per day per beneficiary can apply under ERISA Section 502(c) for failure to provide required notices. The two run simultaneously.
Year-end reconciliation can also surface failures that have been accumulating quietly. Common oversights include terminations recorded in HR but never reported to the plan administrator, dependents who have aged out of coverage, and divorces that triggered a qualifying event but no notice. Each one represents open exposure until it is corrected. The same review that confirms 2027 rates are in the administrator’s hands is the right moment to reconcile the qualified beneficiary roster and check that pending events and required notices haven’t fallen through.
Employers that outsource COBRA administration commonly assume the vendor handles everything. The legal obligation, however, stays with the plan sponsor. Confirming that the administrator has received accurate 2027 data, and documenting that confirmation, is the action that closes the gap between what the employer believes is handled and what the record actually shows.
The same diligence applies to the gag clause attestation, due December 31. Employers who assume a vendor has filed it can find themselves exposed when no one verified the submission. Both obligations carry the same structural risk: the plan sponsor holds the liability regardless of who handles the administration.
