Short answer: Sometimes. Health FSAs are only COBRA-eligible if the account is underspent at the time of the qualifying event, while dependent care FSAs are not subject to COBRA.
A health flexible spending account (health FSA) can be subject to COBRA, but only in limited circumstances. COBRA continuation must be offered only if the FSA is underspent when the qualifying event occurs—meaning the amount the employee has contributed to the FSA for the year exceeds the reimbursements already received.
If the employee has already been reimbursed more than they have contributed at the time of the qualifying event, the health FSA is considered overspent, and COBRA does not have to be offered for the FSA.
When COBRA does apply to a health FSA, continuation coverage generally lasts only through the end of the current plan year, as long as COBRA premiums are paid. The premium charged cannot exceed the applicable COBRA maximum (generally the cost of coverage plus up to a 2 percent administrative fee), which for FSAs is typically based on the remaining benefit available.
Dependent care FSAs are not group health plans and are not subject to COBRA, so no COBRA continuation rights apply to those accounts.
Because health FSA COBRA eligibility depends on the account balance at the time of the qualifying event, employers must evaluate each situation individually and clearly explain the outcome in the COBRA election notice when applicable.
Sources
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Internal Revenue Service, FAQs on COBRA Continuation Coverage and FSAs:
https://www.irs.gov/affordable-care-act/employers/cobra-continuation-coverage -
U.S. Department of Labor, An Employer’s Guide to Group Health Continuation Coverage Under COBRA (Health FSAs):
https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra.pdf
Content history
Originally published: January 24, 2026
Last reviewed: January 24, 2026