I am considering signing up for COBRA for my FSA and was hoping someone might be able to give me some insight. If I sign up for COBRA for one month and pay 1 premium will I be able to spend my entire annual election right away and then cancel it and the company would eat the cost of the unpaid premiums? Or will I only be able to spend the amount I had actually contributed thus far and pay back anything over once I cancel?
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For your Health Care FSA, you would be able to sign up for 1 month premium and spend your entire annual election amount for your FSA, then cancel COBRA. It's the risk the company takes when setting up an FSA.
For example, if your annual election was $2,600, and you only contributed $600 towards it, terminated, then signed up for COBRA, you'd contribute one month at a post-tax premium. You could use the full $2,600, then drop COBRA.
Fair warning that you might not be able to drop only pieces of your COBRA. So if you'd like to still be covered under medical as well as FSA, you may not be able to pick and choose the following month (meaning keeping medical and dropping FSA from COBRA).
PM me if you have any questions. I work for the benefits department in my company.
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@2PeasinaPod: My husband quit his job and that is not what they told us or our experience. We were responsible for paying the Cobra "premiums" (102%) with after-tax dollars to continue the FSA. We were 9 months in and had spent none so it obviously made sense.
I did some research and everything I read confirms this.
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@LBee: If they offer you an FSA in your job, they have to offer continuation of coverage afterwards like the second article says. You pay 102% of the premium.What's happening now?
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@2PeasinaPod: Oh! I think I maybe misunderstood your post? The OP was asking if she could pay 1 Cobra premium and get the whole amount with Cobra by using it and then cut loose. I thought you were saying that was totally valid. We were told that if you Cobra it and use the full amount you have to still pay your premiums - they aren't "out" the unpaid premiums. We were responsible for paying what we used after he left his job.
Potentially his plan was written differently (I saw where some companies can do this). I have no HR experience, just personal experience.
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@LBee: Interesting - they definitely cannot go after you if you use the entire amount of the FSA. So if I elected $2,600, and used it all on 1/2, and terminated on 1/3, I don't have to pay any of that back. It's absolutely the risk the company takes by offering an FSA. Subsequently, if you as the employee don't use he money by the end of the plan year and claim it by the deadline, you forfeit that money. That's the risk you take as the employee.
But they certainly can't force you to continue to pay premiums under COBRA. If you stop COBRA, your coverage ends then.
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@2PeasinaPod: Interesting! I ended up asking my husband about it and he said they said their plan was specifically written that way that upon termination you lose whatever amount your payments don't exceed unless you COBRA. At the time we didn't question it (since it was in the handbook) and it made sense to us to continue it through the year since we knew we were going to spend it and they paid in half. Google seems to indicate it is fairly rare for the plan to be written that way. Lucky us!
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I don't know if it works differently through COBRA, but we spent our entire FSA amount at the beginning of the year when our daughter was born. I was laid off during the summer and the company had to eat the rest of the payments, we weren't responsible for anything beyond what we'd already paid in. I confirmed this with HR when we met to discuss my severance. I would confirm with your HR department.
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