Q.- An employee with a health FSA is getting a divorce. Do we have to allow the ex-spouse to elect to continue coverage under the FSA?
A.- Yes, if the account is not overspent. A health FSA is a group health plan subject to COBRA. A spouse and a dependent child can be a COBRA qualified beneficiary for a health FSA if their medical expenses can be reimbursed under the FSA. An employee’s spouse should be offered COBRA coverage under a health FSA in connection with a divorce.
If the FSA is overspent (more reimbursed than what is left to pay into the FSA), no COBRA election has to be given.
If the FSA is not overspent (more unreimbursed than contributions still due), COBRA election should be given to the spouse.
There are factors to consider in determining the premium that should be charged to continue the health FSA and how the COBRA coverage should be structured.