We have a client that is proposing to offer qualified beneficiaries the option to extend their coverage period to the last day of the current plan year, with a maximum benefit equal to such participant's balance as of the participant's termination date. The participant will pay a one-time premium for this election. In addition to electing COBRA coverage and paying for it for the remainder of the current plan year, this other option provides that participants may use the available balance in his or her account as of his or her date of termination if he or she contributions $1.00. Such participant is not permitted to contribute any additional funds to the plan but is able to utilize the balance of his or her account until the end of the plan year. I have been unable to find anything that would prevent this option, does anybody have any thoughts?

Doesn't this negate the "use it or lose it"? I would not allow this option, especially because there is already a remedy - COBRA.