COBRA and Flex Spending Accounts

[Guest sphile]

Does an employer have to offer FSA under their COBRA coverage?

[Alf]

Health FSA coverage is subject to COBRA. IF an employee was covered by a health FSA at the time of a qualifying event, she is eligible for COBRA wrt that amount, subject to exceptions, of course.

[papogi]

The relatively new regs concerning COBRA/HIPAA/flex have changed things for most employers. The vast majority of HCFSA’s are not subject to HIPAA. If you offer a comprehensive health plan to your employees, your FSA is not subject to HIPAA. This then means that you needn’t offer flex COBRA past the year in which the termination occurs (since the 2% admin fee will mean that the total potential reimbursement will be less than what the employee would put into the account for the year). Concerning the year in which the termination occurs, you only need to offer flex COBRA to a participant if they have not yet been reimbursed an amount equal to or greater than the amount actually contributed to the account by the employee. For instance, if the employee has had no reimbursements, then you would have to offer flex COBRA only up to the end of the current plan year. Many employers don't bother making this calculation (did the employee get reimbursements equal to or greater than the amount contributed?), and simply offer flex COBRA for health care accounts up to the end of the current plan year.

[Guest DMK]

Caution about the above statement regarding FSAs not being subject to HIPAA. While FSAs may be exempt from HIPAA's portability, etc. provisions, many FSA plans ARE treated as covered entities that are subject to the HIPAA privacy requirements.