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I-9s, COBRA and the High Cost of Noncompliance

As any HR or legal professional knows, keeping your business compliant is not to be taken lightly. Make no mistake about it – when errors are made in relation to I-9s and COBRA, hefty fines can add up fast – and can multiply when these processes are still being performed manually.

I-9 errors

A recent Ernst & Young study reported that an average of 12% of Forms I-9, required for employment in the United States, contained errors. Manually recording employee data and fixing any errors costs $7.85 per form. And when non-labor costs are factored in, such as printing and copying, that total rises to $8.32.

Assuming that 12% error rate, a company of 500 employees would be looking at $499.20 to fix 60 incorrect or incomplete I-9s. That may not sound like a lot, but what if those errors aren’t corrected or completed? The federal government could assess penalties between $220 and $2,191 for each wrong form. Therefore, those 60 bad I-9s could end up costing the company up to $131,460.

COBRA noncompliance

Companies with 20 or more employees and a group health plan are required to offer COBRA coverage. To remain COBRA-compliant, employers must send information and notification letters to the qualified individuals. If a company is found to be noncompliant, they can be hit by penalties from multiple entities.

The IRS penalty is a nondeductible excise tax of $100 per day, per violation. If more than one qualified beneficiary exists in the family, the tax increases to $200 per day. The Employee Retirement Income Security Act (ERISA) penalty is $110 per day, per violation, and may be levied per qualified beneficiary with no family maximum. In other words, if a family has four qualified beneficiaries and an employer neglects to notify of COBRA coverage, a judge could fine the employer up to $640 per day.

Crunch time

As you can see, failure to comply with I-9 and COBRA regulations can be a serious financial burden for any business not equipped with HR technology. But how much could it be costing your specific business?

We made an online Cost of Noncompliance Calculator to determine just that. The calculator was built around the extensive research conducted by Ernst & Young on costs associated with common HR tasks and how performing them manually can leave you open to serious risks.

With just two numbers, our calculator will tell you instantly how much noncompliance could be costing your business. You can even download your results to a PDF containing a full cost breakdown. This tool can help demonstrate the critical need for a technology partner that aids in compliance.