Which statement about the COBRA administration fee is true?

• A. The employer may charge a 2% administration fee
• B. The fee cannot be charged under COBRA
• C. The fee is always 5% for all plans
• D. The fee is only charged if the plan ends early

Answer: (A)

Under COBRA, when someone elects continuation coverage, the plan administrator may add a fee to help cover administration costs. This administration fee can be up to 2% of the premium for the COBRA coverage. That’s why the statement about a 2% administration fee being allowed is true. It’s not that the fee is universally prohibited, nor is it a fixed 5% for all plans, and it isn’t only charged if the plan ends early—the 2% fee applies to COBRA premiums whenever continuation coverage is elected. For a quick example, if the premium is $600, the admin fee could be up to $12 per month.