Coverage Changes Under COBRA
COBRA participants generally must continue the same coverage as before their qualifying event but may make changes available to active employees.
FSA and Unlimited Carryover
A health FSA carryover feature lets employees carry over unused balances, but employers need not allow carryovers indefinitely if participation stops.
Q: We offer a health FSA with the carryover option. Do we have to allow employees to carryover unused balances indefinitely even if they don’t make salary reduction elections in a subsequent plan year?
A: No. A health FSA carryover feature allows eligible employees to carry over up to the plan’s permitted carryover limit from one plan year to the next, but employers are not required to allow carryovers indefinitely if an employee stops actively participating in the plan. Your health FSA may be structured so that carryover balances are forfeited if a participant does not make salary reduction elections in the plan year. The terms of the plan determine if a participant must make a new salary reduction election to continue using carried-over funds. This should be documented in the plan communications so it is clear to participants.
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This article is for informational purposes only and is not intended as legal, tax, or benefits advice. Readers should not rely on this information for taking (or not taking) any action relating to employment, compliance, or benefits. Always consult with a qualified professional before making decisions based on this content.
Topics
FSA Reimbursement for Non-Covered Spouse
Health FSA funds may generally be used to reimburse eligible medical expenses for a spouse or qualifying dependents even if they are not enrolled in the employer's health plan.
COBRA Offering to Retirees
When a covered employee becomes entitled to Medicare before retiring, a covered spouse may receive up to 36 months of COBRA continuation from the date of Medicare entitlement.