Q.- We have an employee who is going from full-time to part-time and is losing health coverage. She is electing COBRA. Can we allow her to pay her COBRA premiums with pre-tax dollars through our cafeteria plan?
A.- Yes, if the terms of your cafeteria plan permit the payment. COBRA premiums can be a qualified benefit payable with pre-tax dollars under a Code section 125 cafeteria plan. The cafeteria plan would have to allow the payment of COBRA premiums, and the COBRA coverage would have to be for the employee, spouse or dependent children (not for a divorced spouse or a child who is no longer a dependent). Not only would the cafeteria plan have to recognize the COBRA premiums as a qualified benefit, it would also have to allow the participant to make a mid year change to his/her salary reduction contribution to allow for the COBRA payments mid year.