COBRA & Flex Spending

[Guest sphile]

Does an employer have to offer the FSA as part of COBRA? We have an employer that uses COBRA serve & they administer the dental & medical. FSA is not offered. An employee terminated & was considering electing FSA under COBRA? How does the FSA & COBRA work together? Any input or advice would be much appreciated!

[sloble@crowleyfleck.com]

If the FSA is not a plan that is offered to employees under the cafeteria plan, then COBRA continuation coverage for the FSA need not be offered to a terminating employee (there is no FSA coverage to continue). Conversely, if there is an FSA, then COBRA must be offered with respect to it because FSAs are group health plans subject to COBRA.

[QDROphile]

Please explain why an FSA not under a cafeteria plan is not a group health plan.

[Guest sphile]

The FSA is offered under their cafeteria plan but is not included in their Cobra documents due to cost & administration issues on the employers end. We are their TPA, but are not sure how to handle the participant wanting to elect the FSA along with medical & dental under COBRA. However, according to the participant the FSA was not listed on her choices for COBRA.

[sloble@crowleyfleck.com]

QDROPHILE Reg 1.125-2 q/a-7 FSAs are always group health plans (subject to COBRA) regardless of whether they are offered through a cafe plan--my post was confusingly worded--I apologize. I normally see them run through a cafeteria plan (so employee pre-tax contributions can be made), so I was making an assumption from SPHILE's post.

SPHILE Regardless of what the participant communication says, I think it's pretty clear that COBRA should be offered because FSAs are group health plans. (unless we are dealing with a small employer, a church or the federal govt) The employee wanting the FSA to continue would have a claim if he/she doesn't get it. However, if the FSA is a "qualifying health FSA" the obligation is limited. TR 54.4980B q/a-8b. If the FSA qualifies, then COBRA need not be offered if the account is "overspent" or zero balance, and if the account is underspent, it need only be offered through the end of the plan year.

The FSA document should contain COBRA provisions and COBRA documents should appropriately reference the FSA.