Dependent Care Assistance

[Guest tws]

I posted previously regarding this topic and am following up with another question. In my prior post I described a situation where an employee pays $225 per week for daycare regardless of the number of days the child attends. The consensus was that even if the employee only worked one day in a week, the employee would be entitled to reimbursement for the entire $225 because that's what the employee had to pay to the daycare provider.

The employee is a teacher who gets one week off for spring break and two weeks off for Christmas. The daycare provider charges $225 for each of those weeks even if the child does not attend. Is the employee entitled to reimbursement for these three weeks?

[jsb]

Assuming a $5,000 annual election, at $225 per week your employee would only need to actually utilize 23 weeks of paid care during the entire year in order to qualify to receive their entire election. You shouldn't worry about the few weeks that your employee doesn't "technically" need care as long as there are more than enough care-weeks utilized to warrant full reimbursement.

[Lisa Hand]

The amount paid to simply hold or reserve the space, but not to enable the pariticipant to work, is not valid for reimbursement. While the employee does at the above indicated rate have more than sufficient expenses to max their benefit, you still do not want to process as valid claims time periods which are not.

[GBurns]

Lisa

From what you posted, Are we to understand that it is your position that if the day care charges $250 per week and if the child is sick 1 day and does not attend and on that same day the mother stays home from work to attend to the child (Dr visit etc), you would advise that that 1 day is not eligible for reimbursement??

[Lisa Hand]

I was specifically addressing the issue of the spring break and two weeks at Christmas detailed in the posted query.

[GBurns]

When is this employee charged this money and when do they pay?

If after missing the two weeks at Christmas, does the daycare bills the teacher $725 which must be paid before the child is taken back in? Isn't this the same as a registration or enrollment fee?

Or isn't the $725 the day care charge for that week??

If this teacher was billed monthly or per semester etc, the questioned money would have been included and you would have reimbursed it and would not have questioned it.

If it is reimburseable if paid monthly or quarterly etc why is it not reimburseable when paid weekly?

This is not an elected option by the teacher for additional services, it is the charge imposed by the day care provider.

[Guest tws]

The teacher pays the daycare provider $225 on a weekly basis. The school district is concerned that they will get in trouble with the IRS if they reimburse the teacher for dependent care expenses that were incurred while the teacher was not at work.

[GBurns]

Are you saying that on the weeks that the child does not attend the day care, the teacher mails or drives there and pays them the $225???

[jsb]

GB - Fortunately, I am past most daycare expense. But I had a provider who was a flat monthly charge, regardless of # of days my son attended in any given week. The daycare agreement called for 2 weeks worth of paid vacation and up to 2 weeks of paid sick leave for the provider. You got no break when your child was not in attendence due to the child's illness, your family vacation, or the provider's vacation. Flat rate, monthly in advance, 12 months a year, 2-week termination notice, period. Pay late or try to pay partial...find a new provider. It was not negotiable, it was the provider's business terms. In this situation, I was actually buying a whole year's worth of day care services to allow me to work, albeit paying for it a month at a time. Why would anyone accept this arrangement...quality care at an overall reasonable value compared to the market I was in.

Lisa - Which part of this shouldn't be reimbursed: the provider's vacations, my planned vacation week, the week my son had the flu or the week the provider had the flu? Way too many variables for what was an annual daycare arrangement.

I still would contend that a one or two week school break (why is this any different than a planned vacation?) should not pose any problem at all. This is not an attempt to circumvent taxation on a couple of hundred bucks, but a legitimate expense to allow the employee to have quality daycare throughout the year so that they can come to work for you.

Will theplan allow the employee to change their election to $0 for the affected week(s) based on the qualifying event (reduction in work hours)? If not, perhaps the plan should be amended to permit this change frequency in order to accomodate the reality of the school's work schedules and plan administration needs. But what difference does it really make if the employee has $10,000 (say, 45 weeks x $225) of "legitimate" expense during the year?