Can employees continue to make contributions to their dependent care FSA accounts during FMLA leave? Can they receive reimbursement for expenses incurred during FMLA leave?

Employees on Family and Medical Leave Act (FMLA) leave retain the right to make contributions to their dependent care flexible spending accounts (FSA) during their FMLA absence. Employers can implement any or all of the following options, according to the Internal Revenue Service (IRS):

• Pre-pay. Before their leave commences, employees pay contributions that would be due during their absence.

• Pay as you go. Employees on paid leave continue to have payroll deductions as scheduled. Employees on unpaid leave submit contributions to the employer on the same schedule as active employees.
• Catch up. The employer agrees to advance payments for the dependent care account, with the understanding that employees will be responsible for making special catch-up contributions to repay the advance upon their return from FMLA leave.

In addition, employees on FMLA leave are able to change their election of dependent care FSA participation under a cafeteria plan to the same extent as employees taking non-FMLA leave are permitted to change elections of nonhealth benefits under a cafeteria plan, in accordance with the employer's plan documents. If coverage is dropped during leave, employees must be allowed to re-enroll in the dependent care FSA plan upon return from an FMLA absence.

Regarding reimbursement for dependent care expenses while on FMLA leave, IRS rules require the employee to be gainfully employed or seeking work for dependent care expenses to be eligible for reimbursement. Although there is a safe harbor provision for short-term, temporary absences that do not exceed two weeks, such as a vacation or short-term illnesses, there is no such exception for longer absences, such as those typically covered under the FMLA. Therefore, employees on FMLA leave cannot receive reimbursement for dependent care expenses incurred during a FMLA absence longer than two weeks.