The Essential Guide to Family & Medical Leave

192 | the essential guide to family and medical leave
it does so for employees on other types of unpaid leave. (See “Other Types of
Benefits,” below, for more information.)
Flexible Spending Accounts
A flexible spending account (FSA) allows employees to set aside pretax
income for medical expenses not paid by health insurance (such as
copayments, premiums, and expenses that are outside of the employer’s plan)
or for dependent care expenses. The employee determines how much to set
aside each year (typically, by payroll deductions), within limits set by law.
FSAs are funded entirely by employees, so there aren’t any employer
contributions to be continued during FMLA leave. Employees on leave must
be given three options for dealing with their FSAs:
• continue making payments as if they were still working
• continue their participation in the plan but stop making payments
during leave, or
• stop participating in the plan while on leave.
If the employee either stops making payments or pulls out of the
plan altogether during FMLA leave, the employee has a choice upon
reinstatement: return to the previous coverage level or choose a prorated
coverage amount that doesn’t include payments for the time spent on leave.
Example: David has an FSA and decides to commit $1,200 to it for the year. His
employer sets aside $50 from David’s twice-monthly paychecks and deposits it in his
FSA. David is out for two months—July and August—on FMLA leave. He decides to
continue his coverage but suspend his payments during that time.
When he returns, David would have to make higher payments to set aside a total
of $1,200. Because he missed $200 worth of payments while on leave and there are
eight pay periods left in the year, he would have to have an additional $25 set aside
each pay period, for a total pretax contribution of $75, if he wanted to set aside the
whole $1,200. Alternatively, he could continue setting aside $50 per paycheck and
reduce his total coverage for the year to $1,000.