So, When Can Elections be Changed? The rules have three general categories of events that will allow an election change: • Change in Status: This includes standard life events such as marriage, divorce, birth/adoption of a child, no longer-eligible dependent, and various employment status changes • Cost of Coverage Changes: This includes options such as benefits being offered midyear, spouse benefit coverage changes, and various cost change scenarios • Other Laws or Court Orders: This includes a complex assortment of issues From the many possible options, two event types have become relevant to employees, given the unique circumstances presented by the COVID-19 public health emergency. These are:
• Dependent Care Change in Cost • Special Open Enrollment Opportunity
Dependent Care Election Changes
What’s Happening? Many employees have experienced changes in childcare arrangements because their child’s school or daycare is closed. This obviously changes the fees that employees are paying for their childcare, so employees are asking if they can change their dependent care FSA elections. General Rule Unlike other pre-tax election change rules (which are generally very strict), the dependent care election change rules are already very liberal. In general, a dependent care election may be changed if the employee experiences a “significant cost change” for the care. Therefore, if the childcare fees decrease or increase (either due to fee changes or changes in hourly coverage for a child), if a child is moved from one daycare situation to another where the fees are different, or if the childcare arrangement changes such that the employee no longer has to pay for childcare (or starts paying for childcare), the employee may change their dependent care election. Special note: this election change exception does not apply if the childcare provider is related to the employee by blood or marriage.
No School for Kids. Can my Employees Change their Elections? Yes. The situation we are facing now where schools and daycare facilities are closed presumably changes the childcare arrangements for most parents. Parents previously paying $x are now presumably paying $0. This would qualify under the change in cost provisions allowing employees to make an election change to their dependent care coverage.
A dependent care election may be changed if there is a significant change in cost. This applies to most parents with children at home due to school/daycare closures.
What about Current Balances? Most employees will elect to change their election to zero. Any monies already contributed will remain in their dependent care FSA account and may be used for dependent care expenses incurred prior to the change or upon return to work/childcare.
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