Are flexible spending accounts (FSAs) subject to the Consolidated Omnibus Budget Reconciliation Act (COBRA)?

Author: James O'Keefe, The Seabreeze Group LLC

Yes. FSAs are considered group health plans so, in most cases, they are subject to COBRA. If the FSA is an "excepted benefit" plan, an employer is required to offer COBRA on a limited basis. To be considered an "excepted benefit":

  • The annual FSA election amount cannot exceed two times the amount contributed by the employee. This requirement is met if the employer does not contribute to the FSA;
  • An FSA participant must have had other group health plan coverage available to him or her. In general, this requirement is met if the medical plan and the FSA have the same eligibility requirements; and
  • The maximum COBRA premium either equals or exceeds the maximum FSA benefit. This requirement is met if the employee is the only contributor to the FSA.

If these conditions are met and there is a positive account balance, COBRA must be offered for the remainder of the plan year.

Alternatively, if the conditions above are not met, the FSA must be offered for the entire length of the COBRA period.