DCAP Change in Status?

[Guest SheilaLuken]

An employee's in-home, non-relative dependent care provider becomes ill and is unable to care for the employee's child for a month. She will resume care for the child upon recovery. The employee wants to change his DCAP election to eliminate his contribution for the month of the illness. Apparently, no other dependent care costs will be incurred during this period. The plan has adopted all of the IRS change in status rules. The regulations and examples do not directly address this issue. Would you allow the change? If so, it seems the change could only be made prospectively and would not apply to any prior weeks in which the provider was unable to care for the child.

[papogi]

The IRS allows people out of DCFSA's if they elect the account by mistake (e.g., they don't even have any children). This provision doesn't help here, since this account was correctly elected. The IRS would allow an election change if there were a change of providers (that might have happened), or a change in cost imposed by the provider (that didn't happen). There is no change in eligibility, meaning there still is a child who needs daycare, and both parents still work (I only assume this employee is married). I wonder who is providing care through the interim. I would think there should have been a change in the provider, and this would be a status change to (as the IRS puts it) "reflect the cost of the new child care provider." The IRS doesn't seem to have a problem with the new cost being zero. There would then be another status change when the regular daycare provider returns. Now that status changes are involved, the rules under the 125 plan in question concerning how many days an employee has to notify HR will come into play.