Yes, Susie can rejoin the plan. If an employee who is on unpaid FMLA leave has revoked FSA coverage, the plan must allow the employee, upon her return, to be reinstated on the same terms as if the employee had been working through the leave period without a break in coverage.

If an employee terminates her health care FSA coverage while on FMLA leave, the employee cannot be reimbursed for any expenses incurred during the period of termination. If she elects to rejoin the health care FSA when FMLA leave is over, she may not retroactively elect health care FSA coverage for claims incurred while the coverage was terminated.

A returning employee must be given the choice of either: (1) resuming coverage at the level in effect before the FMLA leave and making up the unpaid premium payments, or (2) resuming coverage at a reduced level and resuming premium payments at the level in effect before the FMLA leave.

An employee on FMLA leave must have the right to revoke or change elections, such as at open enrollment, under the same terms and conditions that apply to employees participating in the cafeteria plan who are not on FMLA leave.

Source: IRS Reg. §1.125-3, Q&A-6; as reported in Employee Benefits Management Directions, Issue No. 526, November 20, 2012.