Q: One of our employees is retiring and is currently subscribing to a Section 125 Cafeteria Plan and this is being paid for through payroll deduction. Do I need to offer the continuation of this coverage through COBRA after she retires? Thank you.
A: A 125 Cafeteria plan allows employee's put a portion of their earnings, pre-taxed, into a Flexible Spending Account (FSA), which they can use to pay for medical bills or expenses. Some types of FSA's are: dependant care or for day care expenses, or for health care expenses. Employer's who give their employee's an option to choose a 125 Cafeteria plan must offer a continuation of these plans upon a qualifying COBRA event. Employees, who choose to continue their health FSA under COBRA, will have to contribute 102% of their current accounts monthly contributions. Those contributions will be post-tax and then you will be able to get 100% of claims reimbursed.
Any tax advantages will be lost and if there is any unused balance in a health FSA account at the term of the COBRA coverage, it will be forfeited.
Copyright 2007 COBRA Insurance
.com - COBRA Insurance Information Source. All rights
reserved.
Important
Disclaimer: COBRA is a law (It is not an endorsed
insurance plan or company). Answers and comments provided
on
Cobra insurance .com website are general information,
and are not intended to substitute for informed professional
medical, psychiatric, psychological, tax, legal, investment,
accounting, governmental, or other professional advice.
Cobra
insurance .com does not endorse, and expressly disclaims
liability for any product, manufacturer, distributor,
service, health plan, or service provider mentioned or any
opinion expressed in the website. Replies, comments, or
information gathered on
Cobra
insurance .com website may not be accurate but are
intended to be helpful.
Search COBRA Insurance Questions
Browse by Category
Print this page
Email this page
Post a comment
Subscribe me
Add to favorites
