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Dependent Care FSA


Belgarath
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Boy, the ramifications of this Corona Virus just keep cascading. The Dependent Care FSA's only provides reimbursement for approved day care expenses, etc. - so with most of the day cares shuttered, then participants may wish to reconsider having the deductions from their paychecks if they think they won't be able to use it all, right? I would certainly consider this an allowable situation to change an election... any thoughts on all this?

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  • 2 weeks later...

Apologies - mistakenly posted too soon. Starting again:

Thanks for posting the link Lois.

2 things:

1. The article states that amendments can be made "prospectively." What does that mean? I'm guessing in the vast majority of cases arising out of the pandemic, the change in/end of dependent care has already occurred. Does "prospectively" mean the events have to occur after the date of the amendment? Is the "prospective" aspect even required?

2. I would make a distinction with regard to the article's references to a change in "costs" as being a permissible election change event in Dependent Care FSAs. Regs Sec. 1.125-4(f) addresses significant cost or coverage changes. While changes in cost generally will permit an election change, 1.125-4(f)(2)(iv) provides that a change in cost applied to dependent care plans "only if the cost change is imposed by a dependent care provider who is not a relative of the employee." That said, several examples in the change in coverage provisions of the regulation illustrate that many or most of the scenarios we would be dealing with in the current situation would qualify as a change in coverage even though they seem to be driven mostly by cost. See 1.125-4(f)(6), Examples 5, 6 and 7. I realize that in the vernacular a cost change is what triggers the ability to make the election change (if permitted by the plan), the terms of art in the regulations would deem it to be a change in coverage. Yes, it's semantics, but it seems important to me that it's important to identify any authority we can rely on in allowing election changes.

All thoughts appreciated, particularly with respect to item 1.

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  • 2 weeks later...

Following up on this now that the dust has settled a LITTLE bit - at this point, what happens if employees are furloughed, and have a health FSA. Or better yet, they were working full-time, and have been dropped to 1 day per week. By any reasonable standard, you'd think that this is an allowable "change in status" that would allow them to make a new election, but I'm not sure, in the absence of additional guidance, that it qualifies. Seems overly harsh to have to continue to withhold the FSA funds when your income has just dropped by 80%.

I know relief for this any many other situations is being discussed, but I haven't heard anything concrete.

Thoughts?

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