Health Care FSA - COBRA for divorcing spouse?

[Guest LMPett]

HC FSA is subject to COBRA for all qualified beneficiaries, which would include spouse and children.

Assuming FSA has positive balance at time of divorce, how do you price FSA COBRA to a spouse in event of divorce? If the employee's annual election amt and payroll deduction stays the same, how can the spouse contribute and make claims? Is a new account set up with no balance??

Ditto if child graduates and is no longer eligible.

Do most employers just not offer to spouse/deps? I can't wrap my head around this one!

[J Simmons]

Here's what I think.

It's COBRA continuation of the group health plan coverage. The ER can charge 102% of the cost to the COBRA continuant making the election. The COBRA continuant would have to pay with after-tax dollars from whatever sources are available to that person, having no mechanism available to do so on a pre-tax or tax-free basis. You'd set up a separate FSA with the amount elected for the remainder of the year, crediting the entire amount up front and collecting the cost from the COBRA continuant monthly over the balance of the year.

The EE's FSA remains the EE's, untouched.

[QDROphile]

There are other interpretations, including that the former spouse and the employee each have their own balances, which is a double dip on the employer. The area is uncertain.