COBRA premium in a Flexible Spending Arrangement

[Ken Davis]

Health insurance premiums for coverage other than that provided by the

employer may not be reimbursed by a health FSA. Does this rule apply to

COBRA premiums that a new employee pays for coverage under the old

employer's health plan while waiting out the pre-existing condition period

of the new employer's health plan?

Thanks,

Ken Davis

Univ. of South Alabama

[Guest Bethmay]

A health FSA can not reimburse or pre-tax any insurance premium expense.

However, insurance premium can be reimbursed or pre-taxed through a premium payment FSA; a separate plan from a health FSA. COBRA premium payment reimbursement or pre-taxing can be accomplished through a premium payment FSA. BUT (there's always one of these) the employer needs to be careful of other state and federal rules and needs to be watchful of its own health plan requirements.

[GBurns]

What allows this separate type of "premium payment FSA"? Does 1.125 -1 or 1.125-2 etc apply, if not what does?

On what payroll would you pre-tax COBRA premium for this separate FSA?

[Guest Bethmay]

One of the most common uses of a Section 125 plan is to pre-tax the employee contribution toward the cost of the premium. So it is Section 125 that would govern the transactions.

If my (I am the employer) group health plan document indicated that the COBRA coverage (if any) of a new hire is included as a health option under my group health plan and I allowed any participant in my group health plan to pre-tax their portion of a premium, then I could allow my new hire to reduce his or her current pay by the amount of any COBRA premium.

This is not the best method to deal with this, though.