Contribution Limits and Election Changes

[Jilliandiz]

Is the Federal Maximum cap for Dependent care still $5,000? Can it be raised? Can insurance contributions increase if premiums increased during the year, or is there a cap as well? Can you make election changes at anytime during the plan year, if you want to increase your contribution due to increase in premiums? Are there restrictions to the plan documents? Help Help!!!

[Guest JerseyGirl]

The maximum allowable for a DCAP FSA is still capped at $5000.00 annually, and it can be raised only if the IRS decides to do so. The maximum possible tax credit available for dependent care was increased to $6000.00 for 2003.

Regarding the increase in insurance premiums, the plan may automatically make a prospective increase (for future premiums, but not to recoup for higher premiums already paid) to pre-tax contributions for the premium only portion of the plan. This does not allow for a change or increase of medical FSA contributions. Not that it would ever happen, but should the premiums ever go down, the contributions could be reduced automatically as well.

This should all be spelled out in the plan document-- I work for a TPA firm, and the documents we provide to our clients do have this clearly stated in the language.

Since these changes can be done automatically, it really does not require a change of election form, but I would highly recommend some sort of notification be sent to all participants to eliminate the possibility of unhappy surprises come pay day!

[Jilliandiz]

What if someone just wants to makes to an election change in general. Can that made anytime during the plan year, or does it have to be the beginning of each plan year? Or is it stated in the document when changes can be made? Sorry, I have a prospective client asking these questions and they have not provided me w/great detail regarding their document.

thanks

[Guest llerner]

There are permitted changes effective 2001 regarding acceptable change of status. An easy way to learn about the changes and how the apply to POP and FSA is the free web site www.changeofstatus.com