FSA for COBRA or exchange coverage?

Question:

We have a flexible spending arrangement (FSA) that allows employees to contribute portions of their earnings to be used for health expenses. The employee is not taxed on their contribution. We have always offered COBRA continuing coverage to employees who terminate their employment.

We now have the situation where we are offering COBRA to continuing employees who no longer meet the eligibility requirements for continued employer coverage because their hours of service have been reduced.

Can these employees use what’s in their FSA account to cover the cost of COBRA or an individual health plan they may get on an exchange?

Answer:


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