FSA to pay COBRA premiums?

[Guest Yolanda]

Can you use an FSA account to pay COBRA premiums from the same employer's medical plan? Prop. Reg. section 1.125-2, Q&A-7(B)(4) says you can't use an FSA to pay for "other health coverage" and gives an example of premiums for another employer's medical plan. Then it says salary reductions under the cafeteria plan for "current health plan coverage" are OK. What about after-tax (COBRA) premiums for current health plan coverage? Can you point me to some authority?

[This message has been edited by Yolanda (edited 10-15-1999).]

[This message has been edited by Yolanda (edited 10-15-1999).]

[IRC401]

From an IRS perspective:

Someone who has terminated employment cannot run his COBRA premiums through a 125 plan because he has no compensation that can be reduced.

From a DoL perspective:

COBRA premiums may be run through a 125 plan so that if an employer is self-insured it can avoid the requirement to put the premiums in trust. This position was stated to me at an ALI-ABA program; I've never seen it in writing.

[SLuskin]

I have recently seen 2 contrasting answers to this, both by very reliable sources. The questions was - if the child of an employee no longer satisfied the insurance company definition of "dependent", ie in college part time but not full time, but the kid still lives with the employee and is still the tax dependent, can the parent/employee pay the child's COBRA from that same health plan through the Cafeteria Plan/ EBIA said yes in its manual and seminar. The American College says no in Course 340.

[Guest Jeff Kropp]

I believe temporary IRS regs exist that would allow an emmployee to increase their contribution to under a cafeteria plan mid-year in order to pay for COBRA coverage for employee's spouse or dependent. These regs are set to expire in 2001. I wish I could remember the cite for you.

[Lisa Hand]

Insurance premiums can not be run through an medical FSA under any circumstances.

Earlier discussions on a separate account for individually owned health premiums should address the other issues raised here.