COBRA & the Flexible Spending Account
FSA programs may be elected under COBRA; however, there are many more rules and requirements for these programs.
COBRA can only be elected if the dollar amount remaining in the employee’s reimbursement account exceeds the amount of COBRA premiums that would be required for the remainder of the FSA plan year. For example, Gemma elected $1200 in deductions for the FSA plan year. She decides to leave the company after 4 months on the plan. She still has $800 to contribute under COBRA for the remainder of the plan year. As long as she has $800 or more dollars remaining of her initial FSA election, she can elect COBRA.
The cost of FSA under COBRA is the amount of the monthly deduction the employee was paying prior to termination. In addition, like healthcare premiums, you can add an administrative fee of up to 2% to these rates.
The longest that an employee can continue their FSA under COBRA is through the end of the FSA plan year in which they qualified for COBRA. For example, if the COBRA plan year runs from January 1 through December 31st, and an employee terminates on April 15th, he can only continue the FSA plan under COBRA through December 31st .