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Offer FSA as part of COBRA coverage

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in Small Business Tax

Q: Our company offers a flexible spending account (FSA) for health expenses. Does the firm have to provide the FSA feature under COBRA? J.B.K., New York, N.Y.

A: Yes. If an employee is covered under a cafeteria plan or other flexible-benefit arrangement, such as an FSA, the continuation coverage requirements of COBRA also apply to the health care benefits chosen by the employee. Key point: For a health FSA, the coverage must be made available to qualified beneficiaries only until the end of the plan year if certain conditions are met. (IRS regulation 54.4980B) For more details, see the Labor Department's COBRA fact sheet, Health Benefits under COBRA, at www.dol.gov/ebsa/pdf/cobra99.pdf.

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