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Dependent care

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Dependent Care FSA: Is Your Plan in Compliance?
"If your plan is not in compliance, you can proactively stop 2019 contributions by HCEs. If shut off in time, your 2019 Dependent Care FSA plan will pass the 55% Average Benefits Test. If not caught in time, you can process refunds to the HCEs or treat the remainder of their plan benefits as taxable income." (Chelko Center for Benefits Management)
Getting the Most Out of Your Dependent Care Assistance Plan Benefits
"If your child attends daycare or uses before and after school care on a regular basis, you may be able to file a recurring expense claim.... A DCAP can be used for day camps only. Overnight camps do not qualify.... If you can find an approved caregiver, you can use your DCAP benefits for sick child care.... [T]here are some expenses that are not approved." (DataPath)
Overview of Nondiscrimination Testing for Educational and Adoption Assistance Programs
"This [article] describes the nondiscrimination tests that apply to both educational and adoption assistance programs to help employers understand how each test operates and what data they need to collect to conduct the tests." (Buck)
[Official Guidance] Text of 2018 Instructions for IRS Form 8839: Qualified Adoption Expenses (PDF)
Nov. 26, 2018. "What's New: The maximum credit and the exclusion for employer-provided benefits are both $13,810 per eligible child in 2018. This amount begins to phase out if you have modified adjusted gross income in excess of $207,140 and is completely phased out for modified adjusted gross income of $247,140 or more." (Internal Revenue Service [IRS])
[Guidance Overview] Cafeteria Plan Election Rules: Flexible Spending Accounts
"IRS regulations ... do not permit an employee to select any option available when a particular election change event occurs, but instead limit options according to the type of event that has occurred.... [This article focuses] on IRS rules governing changes for two types of FSAs -- health FSAs and Dependent Care Assistance Plans (DCAPs)." (Gallagher)
[Guidance Overview] Overview of Dependent Care Nondiscrimination Testing
"To reduce the likelihood of failure, an employer may consider capping HCE DCAP elections at an amount below the $5,000 maximum. Some employers cap HCE elections during open enrollment, before the plan year starts, to help pass the test. Others wait to cap HCEs until tests are conducted during the plan year.... If the plan is at risk of failing the eligibility test, the group eligible for the plan would need to be expanded. Use of the excludable employee categories can also help test results." (Conduent)
What the Proposed Tax Bills Mean for Employer-Provided Fringe Benefits
"Both the House and Senate versions of tax reform propose significant changes that may reduce or eliminate the tax benefits of many popular employer-provided fringe benefits, such as dependent care assistance programs, on-premises gyms and bicycle commuting expense reimbursements. In addition, many common deductions for work-related activities -- including certain meal and entertainment expenses -- may see sweeping changes." (McDermott Will & Emery)
Tax Cuts and Jobs Act Passes House
"Dependent Care FSA eliminated as of 2023: The original version of the bill would have eliminated the Dependent Care FSA as of 2018. So this five-year delay is a small victory. Current Senate Bill: Does not eliminate the Dependent Care FSA.... The bill eliminates the ability for employers to provide tax-free adoption assistance to employees (up to $13,570 in 2017). Current Senate Bill: Does not eliminate Adoption Assistance Programs.... The bill eliminates only the Section 127 qualified program that does not require the employee's educational expenses be work-related. Employers would still be able to offer the separate Section 132 working condition fringe tax-free educational benefit for work-related educational expenses. Current Senate Bill: Does not eliminate Qualified Education Assistance Program." (ABD Insurance & Financial Services)
House Tax Bill Clears Committee, Senate Unveils Its Own Bill
"Significant for employer plan sponsors is that the Senate's proposal does not eliminate dependent care flexible spending accounts. The original House bill eliminated the ability of employers to sponsor these programs, which allow working parents to pay up to $5,000 of daycare expenses tax free." (Lockton)
New Tax Reform Bill: Major Changes to Executive Compensation Lead Impact on Benefits and Compensation Practices (PDF)
9 pages. "Employers that have used nonqualified deferred compensation plans to attract and retain highly compensated employees ... would need to consider alternatives to achieve their goals ... With the possible exception of incentive stock options, there would appear to be no reason for employers to grant stock options or stock appreciation rights.... [R]ule changes would ease the ability of employees to take hardship withdrawals and would reduce some of the complexity in administering hardship withdrawals.... As a taxable contribution, [Dependent Care FSAs] would be effectively eliminated as they would have no value to employees.... The Tax Bill does not eliminate Health Care Flexible Spending Accounts." (Smith, Gambrell & Russell, LLP)
Tax Cuts and Jobs Act: Good News for 401(k) Plans, Bad News for Nonqualified Deferred Compensation
"While there were no adjustments to contributions to 401(k) plans under the Act, that does not mean that the final version of the bill will not include some form of Rothification.... The Act liberalizes certain rules relating to hardship distributions.... This proposal would eliminate many standard forms of deferred compensation, such as 401(k) mirror plans. It also removes from the Code, with respect to services performed after December 31, 2017, Sections 409A, 457(b) (for tax exempt employers), 457(f), and 457A ... The exclusions for adoption assistance, dependent care, qualified moving expenses, and employee achievement awards are repealed." (The Wagner Law Group)
House Tax Reform Bill Unveiled (PDF)
"In addition to proposing reductions in individual and corporate tax rates, the House Bill proposes far-reaching changes to the taxation of executive and nonqualified deferred compensation and relatively minor changes to IRA and qualified retirement plan rules, clarifies that unrelated business income tax (UBIT) applies to state and local government plans, and changes the tax rules that apply to various types of fringe benefits provided to employees. Notably, the House Bill does not contain changes to the tax incentives for retirement savings." (Groom Law Group)
Tax Reform Contemplates Changes to Employee Benefits
"Elimination of certain income tax exclusions ... Loosen[ed] restrictions on hardship distributions from 401(k) plans ... Reduction in minimum age for in-service distributions from 457(b) plans and [DB] plans ... Extended rollover period for plan loan offset amounts ... Modified nondiscrimination testing rules for frozen legacy plans ... Additional limitations on archer medical savings accounts (Archer MSAs)." (Proskauer's ERISA Practice Center)
Quick Guide: 2017 Contribution Limits for FSAs and HSAs
"In 2017, the annual FSA contribution limit is increasing by $50 from the previous year. Employees with this employer-sponsored benefit account can contribute a maximum of $2,600. FSA carryover limits remain the same at $500. Dependent Care FSA, also known as Dependent Care Assistance Plan (DCAP), limits remain at $5,000 for single, head of household, or married filing jointly, or $2,500 each for married filing separately." (DataPath)
Onsite Child Care Ebbs as Flexible Benefits Flow
"Traditional brick-and-mortar child care centers are expensive to operate, require a lot of staffers and represent a significant liability risk to the company should something happen to a child at the center. Above all, 'onsite brick-and-mortar child care centers with a finite number of slots and fluctuating demand are not easy to adapt' to changing needs ... Meeting the needs of diverse employees requires offering benefits that can be used as employees see fit to manage their family and work responsibilities." (Society for Human Resource Management [SHRM])
Dependent Care's Disappearing Act?
"With its recent tax-reform plan, the White House is seeking to eliminate flexible spending accounts related to caring for children and aging parents, while also trying to broaden current limitations.... From an employer standpoint, if these FSAs disappear, it would create an obvious downside for families who use the benefit -- especially since they may not qualify for tax credits until the president's tax reform plan goes into effect[.]" (Human Resource Executive Online)
Dependent Care Reimbursement Accounts and Workplace-Funded Childcare Access
"In 2014, 54 percent of state and local government workers and 36 percent of private industry workers had access to dependent care reimbursement accounts. Only 13 percent of state and local government workers and 10 percent of private industry workers had access to workplace-funded childcare." (U.S. Bureau of Labor Statistics [BLS])
IRS Issues 2014 Versions of Publications 502 (Medical and Dental Expenses) and 503 (Child and Dependent Care Expenses)
"Publication 502 provides valuable guidance on what qualifies as a medical expense under Code Section 213(d), and thus helps identify the expenses that may be reimbursed or paid by health FSAs, HSAs, or HRAs, or covered on a tax-favored basis under other group health plans ... Publication 503 is written primarily to help taxpayers determine whether expenses qualify for the [dependent care tax credit]; while similar requirements must be met for expenses to be reimbursable under a [dependent care assistance plan], caution is advised when consulting the publication for this purpose." (Thomson Reuters / EBIA)
Access to Dependent Care Reimbursement Accounts and Workplace-Funded Childcare
"In 2014, 39 percent of civilian workers had access (available for their use) to employer-sponsored dependent care reimbursement accounts and 11 percent of civilian workers had access to workplace-funded childcare.... In 2014, 58 percent of private industry workers in management, professional, and related occupations had access to dependent care reimbursement accounts, a relatively high rate. By comparison, 18 percent of private industry workers in service occupations had access." (U.S. Bureau of Labor Statistics [BLS])
[Guidance Overview] New Health FSA Contribution Limit Released for 2015 Plan Years
"[Rev. Proc. 2014-61] did not provide any guidance or relief to plans that had already offered or completed annual enrollment and communicated the unadjusted limit to their employees. This did not change the treatment of amounts that an employer may permit to rollover from a prior year or any of the other relief such as gap periods that employers can elect to use or not use. It just increases the employee salary reduction contribution limit for the health flexible spending accounts by $50 for next year and employers are not required to use the maximum limit." (Winstead PC)
[Official Guidance] Text of Rev. Proc. 2014-61: Inflation-Adjusted Limits for 2015 Under Section 125 and Other Code Provisions (PDF)
The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) rises to $2,550, up $50 dollars from the amount for 2014. Under the small business health care tax credit, the maximum credit is phased out based on the employer's number of full-time equivalent employees in excess of 10 and the employer's average annual wages in excess of $25,800 for tax year 2015, up from $25,400 for 2014. The monthly limitations for qualified transportation fringe benefits are unchanged ($130 for commuter vehicles and transit passes; $250 for qualified parking). (Internal Revenue Service [IRS])
Employers Interested in Offering Voluntary Benefits
"7 in 10 employers offer voluntary benefits to improve morale for their existing employees and to attract and retain new talent.... [E]mployers are generally happy with their voluntary benefits advisors. Six in ten employers feel that agents/brokers/consultants usually or always deliver on their voluntary benefit promises. Only eight percent feel that advisors rarely or never live up to their promises. Advisor satisfaction ranks highest at companies with 20 to 99 employees." (LIMRA)
IRS Issues 2013 Versions of Publications 502 (Medical and Dental Expenses) and 503 (Child and Dependent Care Expenses)
"[R]eferring to Publication 502 in connection with these tax-favored benefits must be done with caution, because Publication 502 addresses only the expenses that are deductible -- it doesn't describe the different rules for reimbursing expenses under health FSAs, HSAs, or HRAs. Likewise, Publication 503 is written primarily to help taxpayers determine whether expenses qualify for the [dependent care tax credit]; while similar requirements must be met for expenses to be reimbursable under a [dependent care assistance plan], caution is advised when consulting the publication for this purpose." (Thomson Reuters / EBIA)
[Guidance Overview] Latest Post-Windsor Guidance from IRS Addresses Issues for Cafeteria Plans, Flexible Spending Accounts
"Since ... a participant may be deemed to have notified a plan of his or her marital status by filing a revised W-4, even where a new election form has not been filed, employers may need to review the latest W-4 filed by any participant whose same-sex domestic partner (for purposes of the plan) is covered under the employer's health plan.... Employees will still be able to correct over-withholding or under-withholding with their own filings, but if employers wish to help employees by doing an employer filing, they will have to act before December 31, 2013, which, as a practical matter, could not be accomplished by many employers." (Epstein Becker Green)
[Official Guidance] IRS Revenue Ruling 2013-17: Federal Tax Treatment of Same-Sex Spouses and Domestic Partners (PDF)
"ISSUES: 1. Whether, for Federal tax purposes, the terms 'spouse,' 'husband and wife,' 'husband,' and 'wife' include an individual married to a person of the same sex, if the individuals are lawfully married under state 1 law, and whether, for those same purposes, the term 'marriage' includes such a marriage between individuals of the same sex. 2. Whether, for Federal tax purposes, the Internal Revenue Service ... recognizes a marriage of same-sex individuals validly entered into in a state whose laws authorize the marriage of two individuals of the same sex even if the state in which they are domiciled does not recognize the validity of same-sex marriages. 3. Whether, for Federal tax purposes, the terms 'spouse,' 'husband and wife,' 'husband,' and 'wife' include individuals (whether of the opposite sex or same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and whether, for those same purposes, the term 'marriage' includes such relationships." (Internal Revenue Service)
[Official Guidance] Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law (PDF)
"These questions and answers reflect the holdings in Revenue Ruling 2013-17, 2013-38 IRB.... Q10. If an employer provided health coverage for an employee's same-sex spouse and included the value of that coverage in the employee's gross income, can the employee file an amended Form 1040 reflecting the employee's status as a married individual to recover federal income tax paid on the value of the health coverage of the employee's spouse? A10. Yes, for all years for which the period of limitations for filing a claim for refund is open. Generally, a taxpayer may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later. If an employer provided health coverage for an employee's same-sex spouse, the employee may claim a refund of income taxes paid on the value of coverage that would have been excluded from income had the employee's spouse been recognized as the employee's legal spouse for tax purposes." (Internal Revenue Service)
[Official Guidance] Treasury and IRS Announce That All Legal Same-Sex Marriages Will Be Recognized for Federal Tax Purposes (PDF)
"The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.... [S]ame-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit. Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law." (Internal Revenue Service)
[Guidance Overview] IRS Clarifies Rules on Deductibility of Medical and Dependent Care Expenses
"While the 2012 Publications are substantially similar to their 2011 counterparts, relevant dollar amounts have been revised to reflect their 2012 inflation adjusted values. In addition, the 2012 version of Pub. 502 provides taxpayers with the following new guidance: an explanation of the lodging expense rules as applied to individuals travelling with the person receiving medical care, and an updated explanation of the health coverage tax credit." (HighRoads)
[Guidance Overview] 2013 Benefit Limits
"The IRS and the Social Security Administration have announced the cost-of-living adjustments for various benefit plan limits for 2013. Limits affecting retirement plans [as well as] the limits for health and certain other fringe benefit plans are shown [in this article]." (Kilpatrick Townsend)
Congress Passes Fiscal Cliff Act; Benefits Affected
"Various temporary tax provisions enacted as part of EGTRRA were made permanent. These include: ... The liberalized child and dependent care credit rules (allowing the credit to be calculated based on up to $3,000 of expenses for one dependent or up to $6,000 for more than one) (Sec. 21); ... The exclusion for employer-provided educational assistance (Sec. 127); ... The employer-provided child care credit (Sec. 45F); ... The act also extended through 2013 a number of temporary individual tax provisions, most of which expired at the end of 2011 ... [including] Parity for exclusion from income for employer-provided mass transit and parking benefits (Sec. 132(f))[.]" (Journal of Accountancy)
2013 Expiring and Changing Employee Benefit and Payroll Provisions
"The income tax exclusion for amounts paid by an employer under a qualified adoption assistance program is ... set to expire on December 31, 2012.... Employee contributions to health care flexible spending accounts will be reduced to $2,500 per year for plan years beginning in 2013.... Certain reimbursements for employer-provided educational assistance will expire at the end of 2012." (McDermott Will & Emery)
Silicon Valley Employers Provide Lavish Perks for Employees
"Say 'employee benefits' and pensions and health care will jump to most people's minds. Maybe life and disability insurance will pop up as well. But employers in Silicon Valley are going way beyond that. They're providing housekeeping, cooking, babysitting and a host of other services as perks for their employees." (Forbes)
Home Depot Goes Big with Child Care Center
"In 2009, Home Depot was looking at the spectrum of dependent care solutions. On one end, it considered national discounts for dependent care and at the other, onsite dependent care. Implementing onsite child care at the more than 2,000 Home Depot locations across the U.S. wasn't viable, but a child care facility at the corporate office in Atlanta -- which houses 5,000 staff -- was possible. In addition, the facility is open to all Home Depot employees in the Atlanta area, not just those who work at the head office." (Employee Benefit News)
[Official Guidance] Text of Final PBM Regs Expanding Child Care Benefits for Federal Employees to Include Children of Same-Sex Domestic Partners
"The U.S. Office of Personnel Management is adopting as final changes to its regulations concerning alcohol and drug abuse counseling programs for employees and changes to its regulations concerning agencies' use of appropriated funds to provide child care subsidies for lower-income civilian employees. The changes would clarify the scope of regulations for alchohol and drug abuse programs for Federal civilian employees; change the definition of 'child'; expand regulations to extend coverage to child care services for children of same-sex domestic partners of Federal employees; make certain technical corrections; and make other changes designed to render the regulations clearer and more concise." (U.S. Office of Personnel Management)
Working Moms Taking Less Maternity Leave
"One in four (26%) working moms who have had a child in the last three years reported they did not take the full maternity leave allowed by their company. One in 10 took two weeks or less.... As more moms assume the sole or primary breadwinner role in their households, they�re feeling increasingly torn between providing financial security for their families and having quality time at home[.]" (
Smart Employers Accommodate Needs of Parents in the Workplace
"Smart businesses will recognize that all employees, regardless of their family status, require work/life balance, and that 'families' can be defined in many different ways. Efforts need to be made to accommodate all reasonable requests, and across-the-board fairness has to be our goal. Benefit packages today can be designed with flexibility and choice, ensuring that family situations don't result in inequality." (Kitsay Peninsula Business Journal)
Preparing for a Future that Includes Aging Parents
"Experts say any serious plan for caring for aging parents must begin -- not with discussions about money -- but with a legal document designating someone as having 'power of attorney.' That paperwork grants authority to another individual to handle decisions if a loved one can't make them as a result of illness or memory loss.... Once the legal paperwork is done, families can turn to an array of sources for legitimate advice on boosting savings, buying appropriate insurance and maximizing home equity. For example, many employers offer workplace benefits that include free financial planning services." (NPR)
IRS Explanation for Effect of Statute of Limitations on Adoption Credit Carryforwards
"This [Chief Counsel Advice memorandum] confirms that, notwithstanding the statute of limitations, the refund window remains open for credits incurred from 2005 through 2009 that could not have been used in a year that is closed, at least until 2010 also becomes a closed tax year." (Thomson Reuters/EBIA)
The Affordable Care Act and Women
"The Affordable Care Act includes several provisions that are expected to significantly improve women's health. The [ACA] improves coverage for important preventive services and maternity care, promotes higher quality care for older women, and bans health insurers from requiring women to pay more for the same insurance coverage as men. Over 1 million young adult women have already gained health insurance coverage because of the [ACA] and an estimated 13 million more uninsured women will gain coverage by 2016." (Department of Health and Human Services, Assistant Secretary for Planning and Evaluation)
Ensure Compliance with Reform Law's Lactation Room Requirements
"[R]esearch studies showing that 'lactation programs resulted in a 77 percent reduction in lost work time due to infant illness' and that 'one-day absences occur twice as often for employees whose babies are not breastfed.' In addition, employees of companies providing lactation support say they feel more productive and loyal to the company." (Society for Human Resource Management)
House Subcommittee on Workforce Protections Hearing: 'Ensuring Regulations Protect Access to Affordable and Quality Companion Care'
"[The March 7, 2012] hearing will provide members an opportunity to examine the potential consequences of [the] proposal, including fewer hours of work for employees; higher costs for taxpayers, seniors, and individuals with disabilities; and fewer opportunities to receive in-home care." (House Committee on Education and the Workforce, Subcommittee on Workforce Protections)
Employers Slow to Nurture Breastfeeding Break Rule; DOL Begins Enforcement
"Regardless of whether or not employees are aware, the Department of Labor has started enforcing the law, meaning employers can no longer plead ignorance of the new requirements. In fiscal year 2011, 23 companies were investigated for violations and 15 received citations, according to a DOL spokeswoman." (SmartHR)
Employers' Caring for the Caregivers
"As sporadic caregiving tasks transition into heavy responsibilities, employees could use some help from their employers. Here are three lessons for HR leaders to help their workers balance caring for loved ones with their productivity at work." (Human Resource Executive Online)
Culture Key to Work-Life Programs: AOL Benefits Build Culture of Trust
"In the larger world of work-life and family-friendly programs, we have found that company culture is one of the main factors that determines the success of these programs and that, in turn, work-life programs can be a tool for a real cultural revolution." (Employee Benefit News)
[Official Guidance] Bill Text for H.R.3820: Elder Care Tax Credit Act of 2012
"To amend the Internal Revenue Code of 1986 to modify the dependent care credit to take into account expenses for care of parents and grandparents who do not live with the taxpayer." (The Library of Congress)
[Guidance Overview] IRS's 2011 Form 8839 (Qualified Adoption Expenses) and Instructions
"The revised instructions complete the transformation of Form 8839 to a system of refundable credits. Unfortunately for both the IRS and taxpayers, however, that system was temporary and expired at the end of 2011. Unless an extension is enacted, the credit carryforward rules will return for 2012, and the IRS will have to revise Form 8839 yet again next year." (Thomson Reuters/EBIA)
Child Care Subsidies, Maternal Well-Being, and Child-Parent Interactions
"[The] findings suggest that work-based public policies aimed at economically disadvantaged mothers may ultimately undermine family well-being." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)
Prepare for Higher Child Care and Commuting Costs in 2012
"Thanks to little-known factors such as lower transit and child care benefits, some workers can expect to have their net pay decrease by several hundred dollars this year as new federal regulations rolled out Jan. 1." (Reuters via Employee Benefit News)
IRS Issues 2011 Versions of Publications on Medical and Dental Expenses and on Child and Dependent Care Expenses
"Pub. 502 provides valuable guidance on what qualifies as a medical expense under Code ? 213(d), and thus, helps identify the expenses that may be reimbursed or paid by health FSAs, HSAs, or HRAs." (Thomson Reuters/EBIA)
Breast-Feeding at Work Now Protected by Law
"The Affordable Care Act, which was signed into law in March 2010, amended the Fair Labor Standards Act, and for the first time employers are now federally mandated to provide women with breaks and a place to breastfeed. The final rules regarding the law have not been finalized, but that hasn't stopped the Department of Labor's Wage and Hour division's enforcers from going after employers who don't make accommodations for working moms who want to pump." (
Maternity Leave and Employment Patterns of First-Time Mothers: 1961?2008 (PDF)
"The report first analyzes trends in women's work experience prior to their first birth and the factors associated with employment during pregnancy. Changes are placed in the historical context of the enactment of family-related legislation during the last quarter of the twentieth century." (U.S. Census Bureau)
Half of Working Women Who Gave Birth Did Not Receive Paid Maternity Leave, According to Census Report
"[A] higher percentage of women were being fired from their jobs either during or after their first pregnancy between 2006 and 2008 than had been over the prior 30 years, the report found." (Business Insurance)
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