FSA grace period implementation

[French]

Is anyone having any doubts about implementing this grace period in light of some of the questions raised with respect to COBRA? We have put the brakes on implementing at this time after having read some of the concerns raised in the administration of COBRA (we handle it internally so are even more concerned about compliance).

[oriecat]

What are the COBRA concerns? I haven't seen/heard anything.

[French]

Here are some examples of what I've heard and read:

1. If an employee quits mid-year and does not elect COBRA, would he/she be entitled to the grace period?

2. If an employee quits mid-year and elects COBRA but ceases payments before the end of the calendar year, when would the grace period begin for the former employee?

3. If a former employee electing COBRA benefits from the grace period, should additional premium be charged?

It would seem that these questions would need to be addressed before changing the plan document to allow for the grace period.

[jsb]

1. If an employee quits mid-year and does not elect COBRA, would he/she be entitled to the grace period? Could the plan be written in such a way that the grace period only applies to participants who are participating on the last day of the plan year?

2. If an employee quits mid-year and elects COBRA but ceases payments before the end of the calendar year, when would the grace period begin for the former employee? If not same as above, could your grace period be written to run 75 days beyond the date that the participant ceases participation? If so, how can this be considered an incidental or minimal extension of time if, say, the participant leaves your plan in the middle of the first month of your plan year? What is available during the extension period, the salary reductions that had been made as of the date of termination, or the whole plan year election amount?

3. If a former employee electing COBRA benefits from the grace period, should additional premium be charged? Would you charge extra "premium" for a continuously employed participant who doesn't make an election for the subsequent year? You must (generally) treat your COBRA participant the same as a similarly situated active employee.

[SLuskin]

I called Elizabeth Purcell, the person at Treasury that drafted the notice. She said that the extension period is only available to someone who was a participant (including a COBRA participant) on the last day of the plan year.