Employee Benefits:

Improvements Needed in Enforcing Health Insurance Continuation Requirements

HRD-91-37: Published: Dec 18, 1990. Publicly Released: Jan 8, 1991.

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Pursuant to a congressional request, GAO reviewed the Department of Labor's (DOL) and the Internal Revenue Service's (IRS) enforcement of the health insurance continuation requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), focusing on their: (1) efforts to help individuals who bring cases of alleged noncompliance by employers to their attention; (2) procedures for investigating those allegations; and (3) enforcement history.

GAO found that: (1) IRS sent informational material to people inquiring about continued insurance benefits, but provided no remedy for individuals denied benefits; (2) IRS referred noncompliance allegations to its district offices; (3) DOL provided information on benefit entitlement and application procedures and would also contact and advise employers on behalf of individuals who appeared to be entitled to continued health insurance; and (4) although DOL believed that most employers would comply when they were made aware of their responsibilities, it would not take enforcement action in the event of noncompliance unless a number of beneficiaries were involved.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS has modified its letter response to COBRA inquiries. The letter now states that IRS wants to know about possible violations and describes the information IRS needs and where to send it. IRS responds to potential COBRA beneficiaries with a recorded message which asks them to leave an address to which material will be sent. It does not normally deal with them by phone.

    Recommendation: The Secretary of Labor and the Commissioner of Internal Revenue should act to encourage people who believe they are improperly denied COBRA benefits to report those denials to IRS. In addition to the informational materials DOL and IRS provide, those actions should include: (1) a discussion of the tax consequences of violating COBRA; (2) a statement that IRS wants to be made aware of possible COBRA violations; and (3) a description of the information that IRS needs to pursue a case. Similar information should be provided to callers who may not be sent this material. The information should make clear that the Internal Revenue Code provides no remedy for individuals who are denied COBRA benefits and that people will need to pursue remedies on their own, such as through lawsuits, to obtain COBRA benefits.

    Agency Affected: Department of Labor

  2. Status: Closed - Implemented

    Comments: Labor has installed a recorded message encouraging the reporting of violations to IRS and describing data IRS needs in its automated answering system. A similar message is included in letters responding to COBRA concerns.

    Recommendation: The Secretary of Labor and the Commissioner of Internal Revenue should act to encourage people who believe they are improperly denied COBRA benefits to report those denials to IRS. In addition to the informational materials DOL and IRS provide, those actions should include: (1) a discussion of the tax consequences of violating COBRA; (2) a statement that IRS wants to be made aware of possible COBRA violations; and (3) a description of the information that IRS needs to pursue a case. Similar information should be provided to callers who may not be sent this material. The information should make clear that the Internal Revenue Code provides no remedy for individuals who are denied COBRA benefits and that people will need to pursue remedies on their own, such as through lawsuits, to obtain COBRA benefits.

    Agency Affected: Department of Labor

  3. Status: Closed - Implemented

    Comments: Labor's phone number has been added to the IRS message. The part about difficulties in reaching Labor was not added. Labor's new answering system made it necessary.

    Recommendation: IRS should provide people inquiring about COBRA benefits with the telephone number, as well as the address of the DOL Division of Technical Assistance and Inquiries, so that those needing further assistance can promptly contact DOL. Inquirers should be advised that there may be difficulty reaching DOL by telephone because of the number of calls, and they should write if their situation is not urgent.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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