Missed FSA salary deductions while on unpaid leave

[waid10]

We are a small employer and have an employee that was out on maternity leave (unpaid leave). Since the leave was unpaid, there was no pay for us to withhold FSA contributions from. Now that she has returned to work, can we have her pay in the missed deductions? If so, over what time period? Do we have discretion? We don't want to make it hard on her by taking it all from her first paycheck back. We would rather space it out over several pay periods if possible.

Thanks.

[oriecat]

My TPA has a special form that covers this situation. It allows the participant to elect whether to make up the contributions, which can be done as a lump sum or spread over the rest of the plan year, or just resume them (which would alter the annual election). Do you have a TPA to discuss this with? Have you checked your plan doc to see if it addresses it?

[waid10]

My TPA has a special form that covers this situation. It allows the participant to elect whether to make up the contributions, which can be done as a lump sum or spread over the rest of the plan year, or just resume them (which would alter the annual election). Do you have a TPA to discuss this with? Have you checked your plan doc to see if it addresses it?

We handle this in house (no TPA). I checked our plan doc and it is silent on this issue. So it is kind of unclear what we need to do. From your response, it sounds like we could talk to the employee and give her options. Does that sound right?

[LRDG]

Participants on unpaid leave can continue funding their FSA with post tax contributions during the LOA. Participants on paid leave should be required to continue funding during the paid LOA. If FSA funding has continued during LOA, FSA claims should continue uninterrupted during the period of the LOA.

For unpaid LOA, or unfunded FSA during LOA, an option is to upon return make a one time Payroll deduction for the amount missed while on LOA, resume payroll deductions through end of the plan year resulting in contributions equaling the annual elected amount. FSA claims are usually suspended during the period the FSA is unfunded.

Another option during unpaid LOA and unfunded FSA is to subtract the amount funded prior to LOA from the annual elected amount, calculate new payroll deduction amount based on adjusted amount and remaining payroll frequencies through end of the plan year, with claims suspended during the unfunded LOA.