Q.: An employee terminated employment. He did not have a health FSA election for the plan year, but he did have a carryover balance from prior years. Should he be given a COBRA election and if yes, what would the COBRA premium be?
A.: The answer may depend on the terms of the FSA plan. Some plans require an employee to make a salary reduction contribution in the plan year for a prior plan year’s balance to be available. Some plans allow the carryover to be accessible for only a set number of plan years. Some plans terminate access to a carryover upon an employee’s termination of employment. You should review the terms of the plan document.
Carryovers are not counted for purposes of determining the COBRA premium. The applicable premium must be based solely on the sum of the employee’s salary reduction election for the year and any nonelective employer contribution (if applicable). In this situation, if a COBRA election is provided, there would be no premium associated with continuing FSA coverage under COBRA.
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