Having little children around 24/7 could be chaotic, but it’s the situation many employees find themselves in with daycare centers closing in response to COVID-19. That paycheck deduction to a dependent care account? It may be the last thing parents are thinking about.
Here at HJI | BSG, our staff is reminding all Dependent Care Assistance Plan (DCAP) participants that there is only a 30-day window to modify those elections. Employees may reduce or even cancel the election when the child stops going to daycare or if the daycare provider changes. Any unused balance remains intact until the end of the plan year, or the date employment terminates, although some plans offer a spend-down provision. A spend-down provision allows the employee to access the account for eligible expenses until the end of the plan year in which termination occurs.
Employee Benefits Corporation had these comments:
Under existing permitted election change rules, any change of daycare providers or the cost of daycare for eligible dependents may allow a participant to change add, drop, or adjust the amount of their Dependent Care FSA election.
This means that participants can add or increase their Dependent Care FSA elections in order to pay for daycare for school-age children who are no longer able to attend school. Additionally, participants can revoke or decrease their elections if they stop working, or if they can no longer keep their children in their existing daycare due to facility closures. When regular activities resume, participants will likely experience new change in provider or change in cost events that would allow them to modify their Dependent Care FSA elections again. Permitted election changes generally must be requested within 30 days of the event and must be made on a prospective basis.