Q&A: Do Employers Need to Continue HSA Contributions During FMLA Leave

Question:

We have an employee who is out on unpaid Family and Medical Leave Act (FMLA) leave for 12 weeks. Under our benefits program, we make monthly contributions to employees’ HSAs while they are actively employed. Do we have to continue the monthly contribution while the employee is on FMLA leave, or can we pause them? If we pause them, do we need to make up the difference when (or if) the employee returns from leave?

Answer:

Usually, no. FMLA regulations require employers to maintain an employee’s group health plan coverage during leave under the same terms as if they were still working. This means you must allow the employee to stay on a high-deductible health plan (HDHP) during FMLA. However, the same rule does not apply to the corresponding HSA because it is not considered a group health plan. This is why you are allowed to pause employer HSA contributions during an employee’s unpaid FMLA leave. Nor are you required to make “catch-up” contributions at the end of the employee’s leave, whether they return to work or not.

However, employer contributions may need to be continued during an employee’s FMLA leave if:

1. The employee is using paid leave (such as PTO) during FMLA. The contributions can stop when the employee runs out of paid leave and remains out on unpaid FMLA.
2. The employer continues HSA contributions for other types of leave for similarly situated employees. In this situation, the FMLA generally prohibits the employer from discontinuing them during only FMLA leave.
3. You have a written policy or past practice of continuing the contributions during unpaid FMLA leave.

As for employees continuing their own HSA contributions during unpaid FMLA, they can do so as long as they remain on your HDHP. Consult your cafeteria plan administrator to determine the available payment method(s) for employee contributions when the employee isn’t receiving a paycheck.

Not a client of The Miller Group? Connect with one of our employee benefits advisors to learn how our compliance team can help you stay on track and confidently meet your obligations.