COBRA for FSAs

[Guest zora]

Is it mathetically impossible that an FSA would ever have to offer COBRA in a termination of employment situation if the employer makes no contributions - only salary reduction contributions go to the plan and only the amount of the salary reduction can come out? Assume all the other requirements for the FSA not offering COBRA are met. What I'm getting at is that if the COBRA premium is 102% but the most the employee can get is 100%, then it would never be possible for such an FSA to have to offer COBRA.

As I am writing this question, it now seems to me that it is a mathematical possibility - if the employee has submitted no claims for the year - but I'm confused so thought I would post it anyway. Thanks for the insights.

[QDROphile]

COBRA is required, but most FSAs are subject to a special rule that requires an offer of COBRA continuation if the participant has "underspent" the account. In that situation it is economically rational, even at a 102% premium.

[oriecat]

Definitely possible.

Employee elects $1000

Pays $500 through payroll before terming

COBRA payments would be the remaining $500 plus 2% or $510

As long as the ee has submitted claims for less than $490, then they can come out ahead by doing COBRA and getting the rest of the $1000 back. If they've already gotten $491, then they can only get $509 back and it would cost them more than it's worth.

[jsb]

How about $2400 election, $200 paid in January, terminate Jan. 31. COBRA is $204 per month. Elect. Pay in Feb, March, April - total paid in is $812 (200+204+204+204). Have $3000 dental implants done in April. Submit claim for $3000. Reimbursed $2400. Make no more payments. I WIN!!