DCFSA Qualifying Event

[Christine Oliver]

Hello -

I have a DCFSA participant requesting to reduce her annual election mid-year due to the fact that her child will be starting kindergarten this Fall. Since the participant knew that the child would be starting kindergarten this year, it doesn't seem like this would be an acceptable qualfiying event. Thoughts?

[Peter Gulia]

If DCFSA refers to dependent care flexible spending account:

The plan’s provisions relate not only to Federal tax law but also to the employer’s plan-design choices.

What does the written plan provide about when a participant may change her election?

Does the election the participant seeks to change relate only to a § 129 dependent-care plan? Or does it integrate with a set of choices under a wider § 125 plan, perhaps including a health plan or health flexible spending account?

Not all employers’ plans have the same provisions.

[Christine Oliver]

Hi, Peter -

Yes, I am referring to a Dependent Care Flex Spending account, 129 plan. I understand that the mid-year changes are rather flexible under this plan, and allow mid-year changes for changes in cost of daycare, but my concern with this particular requested change is does the fact that the participant knew that her child would be entering kindergarten this fall when she made her initial election prevent this from being an acceptable change? 

 

 

[Chaz]

I advise clients to permit changes in these sort of cases.  I believe (off the top of my head, so I might be wrong) that the regs specifically permit an election change when a child reaches age 13 and is no longer a qualified individual.  I think a parent would be even more aware of that circumstance.

[Lynne P]

The change in cost of day care is an acceptable DCFSA change in election event.  The child starting kindergarten is a decrease in the cost of day care. The IRS agrees that the DCFSA mid-year changes are more flexible than other changes (like HCFSA or group health plan contributions).

[Christine Oliver]

Thanks everyone!