FSA premiums during FMLA leave
Under the federal Family and Medical Leave Act (FMLA), employers must maintain coverage under any group health plan while employees are on FMLA leave. This coverage must be at the level and under the conditions that employers would have provided had employees not taken leave.
When employees take unpaid FMLA leave, employers must continue paying the same amount toward the employee’s health insurance premiums as they did before the leave started.
What about cafeteria plans, such as flexible spending accounts (FSAs)?
Enter the IRS
The IRS has its own regulations regarding cafeteria plans in relation to FMLA leave that provide some clarity. Under those regulations, employers must allow employees on unpaid FMLA leave to either:
- Revoke coverage; or
- Continue coverage but allow the employees to discontinue payment of their share of the premium.
If employees choose to continue payments, they have several options:
- Pre-pay: Before leave begins, the plan may allow an employee to pay the amount due for the FMLA leave period. Employers may not, however, require that employees prepay the amounts. Contributions under this option may be made on a pre-tax salary reduction basis.
- Pay-as-you-go: Employees may pay their share of premiums on the same schedule as they would have been made if they weren’t on leave. Employees may also use the methods allowed under the FMLA, such as making payments on the same schedule as COBRA payments. Payments made under this option are generally made on an after-tax basis. Contributions may, however, be made on a pre-tax basis to the extent that the contributions are made from taxable compensation due to the employee during leave. If an employee fails to make the required payments, coverage may cease.
- Catch-up: Employers and employees may agree in advance that coverage will continue during leave, and that employees won’t pay premiums until they return from leave. Employers would be responsible for advancing premium payments on behalf of employees during leave. If an employee fails to make required premium payments while on leave, employers may use the catch-up option to recoup the employee’s share of the payments when the employee returns from leave. In such a situation, a prior agreement isn’t required. Contributions under this option may be made on a pre-tax salary reduction basis from any available taxable compensation, or on an after-tax basis. The plan may allow for the catch-up option to apply on a pre-tax basis if premiums haven’t been paid on any other basis.
Employers may require employees to use the catch-up option if it is the only option offered to employees on unpaid non-FMLA leave. If the pay-as-you-go option is offered to employees on unpaid non-FMLA leave, the option must also be offered to employees on FMLA leave.
If employees are using paid leave during otherwise unpaid FMLA leave, employers may require employees to pay their share of the premiums by the method they normally use during any paid leave.
Key to remember: Employers must be aware of how to handle employee FSA contributions during FMLA leave.





















































