Is a $1,000,000 Limit Enough?
Whether up to $1,000,000 is enough depends on your plans, your people and your services. A simple count of exposure gives you a sense of scale.
What to know.
Multiply the daily penalty amounts the law allows by the number of people who could be affected and the number of days a failure could run. Then add the other services in the agreement.
For many small and mid-sized groups a single failure is well below the limit, though several losses add up. Your counsel can help you judge the right level for your situation.
Where to look next.
Count Your Penalty Exposure
See the penalty amounts.
Count the People
See how headcount adds up.
Total or Per Claim
See how the limit works.
Putting numbers around the question.
Start with a count, not a feeling. For each service, estimate the largest realistic failure: how many people would be affected, what penalty would apply to each, and for how long. A notice process that fails for a quarter on a small group is one scale of loss. A reporting failure across a mid-sized workforce is another.
Then compare the totals with the limit and with your own resources. A limit that comfortably exceeds your largest realistic single loss, and still leaves room for a second, is in good shape. One that a single event could exhaust is a prompt to improve controls, ask about higher limits or talk to your insurance advisor about complementary cover.
Common questions on this topic.
Four questions to settle before you rely on it.
Is $1,000,000 a lot?
It depends on your exposure. Compare it with the penalties and the number of people covered.
What if we need more?
Ask us what terms are available. Nothing is promised until it is in writing.
Does a bigger group need a bigger limit?
More people and more services mean more exposure.
Who can help us judge?
Your counsel. CFH can bring counsel in.
Should the limit grow as the group grows?
It should be reviewed. More people, more plans and more services increase exposure, so a limit that was comfortable at one size may not be at the next.
Who decides what level of protection is right?
You do, with advice from counsel and your insurance advisor. A count of exposure is a starting point for that conversation, not a conclusion.
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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.
What Counts Toward the Limit
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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