Q.- We have an employee who is going on disability leave. She participates in our health FSA. Do we have to let her continue to participate during her leave?
A.- You must first determine if the leave of absence is protected leave under the Family and Medical Leave Act. If it is not, the terms of your leave policy will control.
If the leave is a protected leave under the FMLA, she must be given the opportunity to continue her FSA participation during the leave so that she can be reimbursed for expenses incurred during the leave. It is our understanding that the FMLA rules require the employer to provide the employee with options on how to pay for the coverage during the leave. The employee can (a) pre-pay for her FSA contributions during the leave, (2) pay during the leave on an after-tax basis, or (3) make a catch-up contribution to cover the leave when she returns from the leave. There could be issues under the cafeteria plan if the leave is spanning two plan years.
The employee must also be allowed to revoke coverage under the FSA during the leave. If she revokes coverage during the leave, all contributions stop, but the employee can continue to be reimbursed for expenses incurred prior to the leave. You should consult with your legal counsel.