Does COBRA Apply to FSAs, HRAs, and Other Employee Benefit Accounts?

Employers often overlook the fact that COBRA can apply to more than just group health insurance and can include benefit accounts that help with out-of-pocket healthcare expenses like FSAs and HRAs.

As benefits have become more flexible and personalized, many employers now offer these types of accounts alongside or instead of traditional health plans. When an employee leaves or experiences a change in status, employers need to understand how COBRA interacts with these benefits to ensure everything is handled correctly.

Does COBRA Apply to FSAs?

Health FSAs can sometimes fall under COBRA, depending on how much an employee has contributed and used in their account at the time of departure. In general, if there’s a remaining balance available to the employee, they may be eligible to keep using it after leaving the company.

Even though most employees don’t continue their FSA after leaving, employers still need to understand when it applies and ensure the proper steps are taken. Missed notifications or mismanagement can lead to confusion for employees and potential risk for the company.

Does COBRA Apply to HRAs?

HRAs have a more consistent relationship with COBRA. Because HRAs are employer-funded and used to cover medical expenses, they are typically included in COBRA continuation when an employee’s coverage ends.

Whether the HRA is standalone or paired with another health plan, employers should be prepared to offer continuation options and clearly communicate how any remaining funds can be accessed.

What About Other Employee Benefit Accounts?

Not all benefit accounts are affected by COBRA, and that’s good news for employers looking to offer creative perks without added complexity. For example:

• Dependent care FSAs and commuter benefits generally fall outside of COBRA requirements.
• Wellness and lifestyle accounts, education reimbursement, and charitable giving accounts are typically not impacted either.

Still, when a company offers multiple types of benefits, it’s important to know which ones require action during employee transitions. Managing employee departures is already a delicate process. Adding complexity with benefits continuation, especially when multiple accounts are involved, can easily lead to errors or oversights. Multiple vendors can increase those risks and the HR team spends more time tracking down answers instead of helping people.

That’s why it’s so important to have a streamlined approach.

BASIC Simplifies the Administration and Compliance Process

Our Consumer Driven Accounts (CDA) platform brings everything together. We handle COBRA administration right alongside our full suite of employee benefit accounts like FSAs, HRAs, commuter benefits, education reimbursement, wellness funds, and much more.

With everything in one place, employers can manage benefits more easily, HR teams can stay confident in their compliance, and employees get a more seamless experience, especially during times of transition.

If your organization or your clients are managing COBRA and employee benefit services across multiple vendors, there’s a better way. Request a proposal to see how BASIC can simplify processes today!