Compliance Q&A: Employer Guide to 2026 Benefits Compliance COBRA Continuation Rules and Dependent FSA Limit Increase

  • August 25, 2025
  • Posted by: Gus Altuzarra
  • Category: Compliance Q&A
No Comments
hra health plan

8.8.25 |  INCREASE IN DEPENDENT FSA LIMITS FOR 2026

 

Q. The dependent care FSA plan runs from Sept. 1, 2025, to Aug. 31, 2026. With the increased limits for Dependent Day Care, can there be an additional open enrollment in January 2026 so the employees can defer more funds under the increased limits?

 

A. Yes, an employer with a non-calendar year Dependent Care Assistance Plan (DCAP) can change the limit effective Jan. 1, 2026, and provide employees with an open enrollment opportunity for their DCAP elections effective Jan. 1, 2026. The employer does not have to wait until the start of the 2026 DCAP plan year.

 

8.14.25 |  SECOND COBRA QUALIFYING EVENT

 

Q. An individual is on COBRA and had planned to enroll in his wife’s plan when he exhausts 18 months of COBRA coverage at the end of October 2025 but was served divorce papers in May. Does this create a second qualifying event that triggers a COBRA extension from 18 months to 26 months?

 

A. The divorce is not a second qualifying event that would extend the former employee’s 18 moths of COBRA. For a divorce to extend COBRA, the divorce must be a second qualifying event. This means the divorce would have caused a loss of overage if the former employee was not already on COBRA. That is not the case here since the divorce would not impact the employee’s eligibility under his former employer’s plan (only his spouse’s eligibility). As a result, the former employee is not entitled to extended COBRA due to his divorce.

 

8.21.25 |  COBRA CONTINUATION FOR SMALL EMPLOYER PLAN

 

Q. A small employer group fell below the 20-employee threshold to offer COBRA, but has two active COBRA participants. Does the employer have to manage COBRA for these two former employees until they exhaust coverage or cancel? Is the employer allowed to cancel this COBRA coverage now?

 

A. If a plan was subject to COBRA and then becomes a small employer plan, the plan remains subject to COBRA for qualifying events that occurred when the plan was subject to COBRA. Q&A 5 of the U.S. Treasury regulations contains some useful examples highlighting this rule.

 

Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.



Author: Gus Altuzarra
Gus is the CEO of Aston Sharp Insurance Services. In 2012, Gus founded Aston Sharp to start offering a larger scope of insurance products to his clients. With extensive history in life, disability, and long-term care planning, Gus acts as a full service insurance advisor. Gus initially started working with group employers offering assistance with the new changes mandated by the ACA (Affordable Care Act). The in-flow of new technology in recent years has created an opportunity to revolutionize an outdated industry. Gus now works to consolidate Employee Benefits, HR, Payroll, Work Comp, and ACA compliance all under one roof – delivering an easy-to-use technology driven solution to his clients.

Leave a Reply