COBRA / FSA
thelmab
1 Post
Does anyone have a sample letter of a COBRA letter that includes FSA account verbage? The sample I found online only include medical and dental.
Comments
IRS regulations limit the application of COBRA to most FSAs. COBRA continuation coverage under the FSA need not be offered for any plan year after the plan year in which the qualifying event occurs if the FSA satisfies two conditions: The employer offers another group health plan and, for the plan year in which the qualifying event occurs, the maximum amount that the FSA could charge as a premium for a full plan year of COBRA continuation coverage equals or exceeds the maximum benefit available under the health FSA for that year. This will almost always be true.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
In addition, if a third condition is satisfied, the FSA need not make COBRA continuation coverage available at all. This condition is satisfied if, as of the date of the qualifying event, the maximum benefit available to the qualified beneficiary under the FSA for the remainder of the plan year is not more than the maximum amount that the plan could require as payment for the remainder of that year to maintain coverage under the health FSA.
If all three conditions are satisfied, COBRA does not have to be offered for the FSA at all.
If just the first two conditions are satisfied, COBRA has to be offered for the FSA for the balance of the current plan year only.
If both the first two conditions are not satisfied, COBRA has to be offered for the full 18, 29, or 36 month period that would normally apply, depending on the qualifying event. This will usually only be true where the employer offers the FSA only and does not offer another group health plan.
In any case, if COBRA has to be offered the letter may be modaled on the medial dental letter. The applicable premium during the blance of the first plan year would be 102% of the employees monthly salary reduction. If COBRA only has to be offered for the the balance of the first plan year, it should be explained that because The employer offers another group health plan and, for the plan year in which the qualifying event occurs, the maximum amount that the FSA could charge as a premium for a full plan year of COBRA continuation coverage equals or exceeds the maximum benefit available under the health FSA for that year, IRS regulations only require that COBRA be offered until the end of the current plan year.
If COBRA must be offered for the full maximum continuation period, it should be explained the the qualified beneficiary must make a new deferral election which will change the applicable premium to 102% of the new deferral. I
It should be explained that the COBRA premiums are not paid pre-tax.
It might be advisable to explain the kind of situation in which a qualified beneficiry might want to retain FSA coverage following a qualifying event by paying the premium with after tax dollars. This will generally only be true where the employee has used little of his or her deferrals at the time of the qualifying event and is willing to pay out-of-pocket because he or she anticipates medical expenses at some time before theend of the plan year plust any grace period.