Leave of Absence and Medical Flex Spending Account

[Christine Oliver]

If an employee chooses to catch-up on their medical FSA contributions upon their return from leave and they do not have enough pays to complete the catch-up contributions prior to year end, can the employer post the remaining contributions due as post-tax contributions and take the remaining amount due in the following calendar year?

[Brian Gilmore]

I've always been comfortable with that approach, but I don't believe there's any guidance directly addressing it.  There are rules prohibiting pre-payment in year one for year two coverage, but no such rule exists with respect to catch-up contributions in year two for year one coverage.  It doesn't seem to implicate the Section 125 prohibition of deferral of compensation in the same manner as pre-payment, which is why I've been comfortable with clients using year two catch-up.

Here's some materials I've put out addressing the issue if you're interested:

• 2023 Newfront Health Benefits While on Leave Guide

• https://www.newfront.com/blog/health-benefits-protected-leave-2

[Christine Oliver]

Thanks so much Brian. Your knowledge and materials are excellent!