What Counts Toward the Limit
Ask what counts against the limit: penalties, correction costs, legal costs or all three. The answer changes how far the limit goes.
What to know.
If defense costs sit inside the limit, a contested claim can use up part of the amount before any penalty is paid. If they sit outside, the whole figure stays available for the loss.
Read the definition of a covered loss and the paragraph on costs. Ask the provider to explain anything unclear in writing.
Where to look next.
Penalties and Related Costs
See what a covered loss can include.
Amounts Above the Limit
See what stays with the employer.
What the Protection Covers
See the overview.
Reading the paragraph on costs.
The definition of a covered loss and the paragraph on costs together decide how far the limit goes. Read them for the verbs: pays, reimburses, defends, includes. A promise to pay penalties is different from a promise to defend a claim, and a promise to defend may or may not erode the limit.
If the paragraph is silent on a type of cost, assume it is not covered and ask for a written answer. Costs that employers commonly want to know about include the price of correcting a filing, mailing corrected notices, outside counsel and any interest. Each answer changes how much of the limit is left for the loss itself.
Common questions on this topic.
Four questions to settle before you rely on it.
Do legal costs count?
Ask whether defense costs are inside or outside the limit.
Do correction costs count?
Only if the terms say so.
Do paid claims reduce the limit?
Under a total limit, yes.
Where is this written?
In the definition of a covered loss and the limit paragraph.
Is a corrective filing a covered cost?
Only if the terms say so. Ask whether corrective filing and re-mailing costs count as part of a covered loss and whether they use up the limit.
How do we find out how much of the limit has been used?
Ask the provider for a statement after any paid claim showing what has been paid and what remains. Keep it with your records.
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General information about compliance service protections, not legal or tax advice. Plan-specific questions belong with your counsel, and we will bring them in.
Related guides.
What Limit Does Compliance Protection Carry?
The overview this page belongs to.
Compliance Services With Hold-Harmless Protection
What the protection is, what it covers and what to ask.
Count Your COBRA Penalty Exposure
The next question on the same topic.
Where the Rules Come From.
The laws and rules named on this page link to the statute or regulation they come from. This is general information, not legal or tax advice, and rules change, so check the current text.
COBRA Excise Tax (26 U.S.C. 4980B)
The tax on failures to meet COBRA continuation coverage requirements.
ERISA Civil Enforcement (29 U.S.C. 1132)
Includes the daily amounts a court may assess for failing to provide required notices.
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