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Leave of Absence and Medical Flex Spending Account

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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?

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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:


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