Q.- An employee is going from full-time to part-time, will lose health coverage, and will be offered the opportunity to continue coverage under COBRA. Can the part-time employee pay for his own COBRA premiums on a pre-tax basis?
A.- The answer to this depends on the terms of the employer’s cafeteria (Code section 125) plan. The IRS allows COBRA premiums to be paid through an employer’s cafeteria plan, but the plan has to be drafted (1) to allow part-time employees to participate in the cafeteria plan and (2) to allow the payment of COBRA premiums as an eligible benefit. The cafeteria plan would also have to recognize paying for COBRA as a mid-year change event.