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STD Massachusetts: Paying Flexible Spending Accounts w/Post-tax dollars?

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  • STD Massachusetts: Paying Flexible Spending Accounts w/Post-tax dollars?

    I will be out on STD for 4-6 weeks later this Spring.

    I am required to pay my 'own share' of the benefits out of pocket while out. I have no problem with that requirement (and think it's pretty standard).

    In past years this 'payment out of pocket' did not include 401(k) or Flexible Spending Accounts. No contributions were made during your absence. You could 'catch up' your 401(k) by adjusting your deduction before/after being out (to account for lack of contributions during your absence). For the FSAs (both health and dependent day care) there was no catch up.

    There has been a change in policy for 2009. I still cannot make 401(k) contributions while out (and as I understand it's because I don't have pre-tax dollars to contribute since I am not being paid by my employer). I have no problem here.

    However I will be billed for my FSA account contributions -- in essence being required to pay with post-tax dollars. This strikes me as odd. The whole point of FSA is that you get a savings by paying pre-tax.

    I know I will get the FSA money back when I subsequently submit expenses against the respective accounts, but it irks me to have to pay the money post-tax, especially when I will have less money coming in than I normally do.

    I am also concerned about the legality and implication of having post-tax money in these accounts. I have found nothing about it online. It is a new policy for 2009 at my company and they don't seem to understand my concern.

    Is it legal to pay for FSA with post-tax dollars? Are there any tax ramifications? Anything else I should know/ask?

    Does it make a difference that they exclude 401(k) contributions but will require FSA contributions?

    Thanks in advance.

    Cheers,
    -Tia

  • #2
    I don't know that it answers my original question, but upon further digging I have discovered that my local HR mispoke.

    The (external) company managing our benefits informed me that FSA for Dependent Care is suspended while out on FMLA. No contributions may be made and no expenses incurred during the leave are eligible for reimbursement.

    For the Health Care spending, the default is to be billed (and thus payed with post-tax dollars) -- any expenses incurred during the leave are reimbursable (to the same extent that they would be if I were not on leave).

    Further, I have the option of supsending my Health Care spending account contributions as well, in which case any expenses incurred during the leave would not be reimbursable.

    So while I don't have an answer to my original question as to the legality of requiring me to pay with post-tax dollars, the question is now mostly moot.

    -tia

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