Dependent Care FSA - Divorced Spouse Loses Custody - Change in Status?

[rocknrolls2]

A participant in a cafeteria plan enrolls in the dependent care FSA to provide after-school supervision to her child who is under age 13. During the year, the judge awards custody of the child to the ex-spouse, who lives in a different state (shich is not contiguous to the participant's state). Is this a change in status sufficient to support the participant's desire to prospectively revoke deductions for the remainder of the year?

[david rigby]

You may wish to Search the Message Board, possibly with keyword "custody", or similar.

[LRDG]

Provided the plan allows election changes, divorce is a qualifying status change according to IRS cited change in election rules under Code section 1.125-4. Losing custody in the divorce proceeding or amended divorce proceedings would qualify.

[rocknrolls2]

Provided the plan allows election changes, divorce is a qualifying status change according to IRS cited change in election rules under Code section 1.125-4. Losing custody in the divorce proceeding or amended divorce proceedings would qualify.

Even if the participant was granted sole custody at the time the divorce was entered and the change in custody to the other spouse occurred a number of years after the divorce decree issued?

[LRDG]

If custody agreement and divorce decree was amended and lost 2 yrs ago, that would not be within a reasonable time period from the date of the event allowed for election changes. The plan document should stipulate if election changes are allowed, and if so, election changes must be made within administratively reasonable period of time, 30-60 days from the date of the qualifying event. I don't believe the regs specify the exact number of days, but the plan document should.

Try this link I got via a google search.

http://benefitslink.com/taxregs/1.125-4-final-2001.html

[LRDG]

If the custody arrangement is ammended sometime after the final divorce decree, than I would treat court ordered amended custody no differently than the original divorce/custody agreement, and allow the status change within a reasonable period of time as required in the plan document, assuming the plan allows status changes, although the regs only refer to divorce as a qualifying event eligible for election/status change under Sec. 125.