Among the previously discussed complications that Health Savings Accounts (HSA) can bring to an employer s benefit plan, there is an administrative perk unique to HSAs. Unlike Flexible Spending Accounts (FSA) and Health Reimbursement Arrangements (HRA), HSA accounts are not subject to COBRA.
A popular question is Practically everything else is subject to COBRA, why the exception? The answer is that HSAs are an entirely different benefit structure and there is no special exception. An HSA account legally belongs to the employee and account ownership does not change when their employment status does. As such, their HSA benefit remains active during employment transition. Although employer contributions will cease along with employment status, their HSA account is always active so long as the employee remains HSA eligible. In short, because the benefit does not end, there is no need for COBRA.
Some employers may see this as a welcomed perk while others may not have a preference either way. Although Health Reimbursement Arrangements (HRA) and Flexible Spending Accounts (FSA) are subject to COBRA, few participants select to continue these benefits. As such, this perk may not significantly lighten an employer s administrative burden. None the less, this unique HSA perk is a factor to consider as you decide what benefit structure works best for your company.