Penalty or Assessment Under a Hold-Harmless Claim
A penalty or assessment is the loss a hold-harmless claim is usually about. It can come from an agency, a court or a tax, and the provider’s error has to be tied to it.
What to know.
Notice failures under COBRA carry an excise tax under the tax code and civil amounts under ERISA. Late ACA filings carry their own penalties. Keep the letter or notice that states the amount and the date.
The provider will want to see the notice, the underlying error and your records. The written terms decide whether the amount is within a covered loss and within the limit.
Where to look next.
Know the COBRA Rules
See notice requirements and deadlines.
Know the ACA Rules
See reporting penalties.
Know the Limit
See what the protection can pay.
What a claim file should contain.
A claim built from a penalty letter has four parts: the letter or assessment itself, the evidence of the underlying error, the records showing what the employer supplied and when, and the calculation of the amount. The more complete the file is when it is submitted, the less back-and-forth there is.
The order matters. Notify counsel and the provider as soon as the letter arrives, because response deadlines usually run from the date of the notice. Do not pay a penalty before you understand the reimbursement process and whether relief such as reasonable cause is available. A penalty that can be reduced should be reduced before any claim is made for it.
Common questions on this topic.
Four questions to settle before you rely on it.
What amount can a penalty reach?
It depends on the rule and the number of people affected. Check current figures in the law.
Do we pay the penalty first?
Ask the provider how reimbursement works. The agreement sets the process.
Can a penalty be reduced?
Sometimes. Ask your counsel whether relief is available before you pay.
What if the penalty is over the limit?
The balance stays with the employer. Ask how the limit applies.
Should we pay the penalty before making a claim?
Ask your counsel and the provider first. Some penalties can be reduced or waived, and the agreement sets how reimbursement works, so paying early can complicate both.
What if only part of the penalty came from the provider’s error?
Ask how the agreement treats mixed causes. The covered share may be reduced to reflect the employer’s own contribution to the problem.
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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 Triggers a Hold-Harmless Claim
The overview this page belongs to.
Compliance Services With Hold-Harmless Protection
What the protection is, what it covers and what to ask.
How to Make a Written Hold-Harmless Claim
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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