Can COBRA insurance be flexed?

[bcspace]

Under any circumstances, can an employee "flex" a spouse's (not an employee) insurance premium which is currently under COBRA? Doesn't makes sense to me why they would want to do that as the spouse is eligible for coverage under the employee's company insurance but nevertheless, the question remains.

[LRDG]

Spouses are not always both employed for a variety of reasons. One may be stay at home, student, disabled or if both are employed, insurance may not be available through both spouse's employer.

That aside, even families where both spouses are employed, health coverage is often provided under one spouse's employer provided health plan. There is no mandates that employeed couples each aquire insurance coverage from their respective employer's.

In any case, payment for eligible beneficiary's cobra payments are eligible under Sec. 125.

[J Simmons]

Under any circumstances, can an employee "flex" a spouse's (not an employee) insurance premium which is currently under COBRA?

Yes, but perhaps not the unspecified factual situation that you may be dealing with.

Prop Treas Reg § 1.125-1(l)(1) provides (bolding added)--

Under §1.125-4©(3)(iv), COBRA premiums for an employer-provided group health plan are qualified [cafeteria plan] benefits if: (i) The premiums are excludible from an employee's income under section 106; or (ii) The premiums are for the accident and health plan of the employer sponsoring the cafeteria plan, even if the fair market value of the premiums is includible in an employee's gross income. See also paragraph (e)(2) in §1.125-5 and §54.4980B-2, Q & A-8 of this chapter for COBRA rules for health FSAs.

Prop Treas Reg § 1.125-1(l)(2), Example (vi) provides--

Employer O allows C to pay for COBRA premiums for C's former spouse, with after-tax employee contributions because although accident and health coverage for C's former spouse is permitted in a cafeteria plan, the premiums are includible in C's gross income.

Treas Reg § 1.125-4©(3)(iv) provides (bolding added)--

Exception for COBRA. --If the employee, spouse, or dependent becomes eligible for continuation coverage under the group health plan of the employee's employer as provided in section 4980B or any similar state law, a cafeteria plan may permit the employee to elect to increase payments under the employer's cafeteria plan in order to pay for the continuation coverage.

[bcspace]

Thanks for your help guys. I think I have found the answer (which is "no") here out of the EBIA manual (hopefully it's not a violation to post snippets of it?)...

Spouse’s or Dependent’s COBRA Coverage Under Plan of Spouse’s or Dependent’s

Employer

Though the issue is not entirely clear, a spouse’s or dependent’s COBRA continuation

premium under a plan of the spouse’s or dependent’s employer likely should not be paid using pre-tax salary

reductions under a cafeteria plan maintained by the participant’s employer. While the 2007 proposed Cafeteria Plans

regulations and their preamble specifically allow pre-tax reimbursement of COBRA premiums for an

employee’s COBRA coverage under a different employer’s plan, no mention is made of reimbursing COBRA

premiums for a spouse’s or dependent’s coverage under a plan of another employer and no other formal

guidance indicates whether a cafeteria plan can pay or reimburse such premiums.310

The literal language of the 2007 proposed regulations may reflect the view that reimbursing

such premiums would constitute impermissible participation in the cafeteria plan by the spouse or

dependent.311 Moreover, such coverage arguably would not be eligible for pre-tax treatment because it is not

coverage belonging to the employee or coverage under the health plan of the employer sponsoring the cafeteria

plan.312 More guidance on this issue would be welcome.

Footnotes:

310 Prop. Treas. Reg. §§ 1.125-1(a)(3)© and 1.125-1(l)(2), Example.

311 Under Prop. Treas. Reg. § 1.125-1(g)(4), a spouse or dependent “may not be given the opportunity to elect or purchase benefits offered by the plan.”

312 Consider the negative inference in the Preliminary Draft of IRS Examination Guidelines for Cafeteria Plans, discussed and reproduced behind Appendix Tab 2, where it asks: “Are benefits not provided by employer permitted to be paid through the plan (e.g., insurance provided by spouse’s employer)?”

[SLuskin]

We checked this with an attorney and she said that you cannot run a spouse's COBRA from the spouse's former employer through the flex plan of our client's employee.