Dependent Care While on Leave

[Guest M L Sullivan]

I know that you cannot take advantage of dependent care FSA plan while you are on a leave of absence (e.g., maternity leave). However, I cannot remember if we are required to continue taking out the deduction, or stopping the deduction.

Seems like I remember some silly rule that said deductions continue during your leave - because you should have planned for the leave.

But, then I remember something about when you go out on leave (FMLA) you can make changes to your elections.

Help.

[SLuskin]

If you are not eligible to participate, then deductions stop. The situation you are describing sounds like there is no employment related daycare, so there should be no payroll deductions. Scenarios like this are also covered in the new status change regs.

[Kirk Maldonado]

SLuskin:

Does the change occur automatically, or does the employee have to give written notice for the deductions to stop? If the deductions are supposed to stop automatically, how does the employer find out about the changes (if it doesn't receive notice from the employee)?

[SLuskin]

The employer should surely know that the employee is out on leave. and the HR department, if any, should know that the employee is not eligible for daycare while on leave. If no HR dept, then the Section 125 Plan consultant that they deal with should have some kind of avenue of communication for this type of thing. I don't believe the ee has to sign anything if out on upaid leave. but it wouldn't hurt to institute the procedure.