If your group is subject to COBRA, when participants in your HRA or Med-FSA experience a COBRA-qualifying event, as the plan sponsor, your company is required to provide those individuals with a COBRA notice and COBRA enrollment forms for those benefits as well.

By electing COBRA to continue the Med-FSA, the employee/participant will extend their period of coverage to submit claims for up to the balance of that plan year.  Unless the employer contributes to the Med-FSA, COBRA for the Med-FSA does not extend beyond the end of the year in which the qualifying event occurred (no re-election or continuation into subsequent plan years.)

The eligibility for COBRA for the Medical Flex Spending Account can be limited to those individuals for whom the cost of the COBRA premiums for the remainder of the year would be less than the maximum benefit the employee could derive from the plan for the balance of the year.  If the contributions to date are greater than the payments made to date, the employee may be eligible for COBRA for their Med-FSA benefit.

It is clear that a participant terminating employment or losing coverage due to a change in employment status would have experienced a COBRA-qualifying event.  It is possible that other events, such as a divorce or a dependent losing eligibility due to age, could be a COBRA-qualifying event for the Med-FSA.  If you encounter these situations, please call our office.        

Generally speaking, the Medical Flex Spending COBRA premiums are calculated by taking the annual election less the contributions made up to the point of the COBRA-qualifying event plus 2%.  (Election – Contributions x 102%).  You then divide that amount by the number of months left in the year to determine the monthly COBRA premium.

For example, if an employee had an election of $1200, had contributed $600 and had been reimbursed $800, their maximum benefits for the balance of the year would be $400 but their COBRA premiums would be $612 ($1200 election - $600 contributions x 102%). 

In this example the COBRA premiums would be greater than the maximum benefit and you do not have to offer COBRA for the Medical Flex Spending Account.  

If, however, that person had only been reimbursed $400 to date, the maximum benefit would be $800 and the COBRA premiums $612 so that person would be eligible to elect COBRA to continue their coverage in the Medical Flex Spending Account up to remainder of the year.