Dep Care FSA - Allow to Cancel?

dwitt

Good morning all,

I'm hoping someone has input on Dependent Care Flexible Spending Accounts.

My questions:
1. Example, A participant has set up an FSA account for the max, $5000 for 2007 and submitted the enrollment form by the Company's designated deadline for enrollment which was 12/1/06. The participant's ex-wife has since lost her job and has decided to stay home, hence there will no longer be a daycare expense in 2007. This participant has asked to cancel his FSA (the plan year hasn't even begun yet) and the Company claims this is not allowed. Can a company do that?

2. I'm trying to locate the official rules governing Cafeteria plans, FSA's specificially, and am having difficulty finding anything useful. Does anyone know where to obtain this information in a language easy to understand?

The scenario above does not pertain to my company - our spd states that an individual can change or stop their reduction if they experienced a "major life change" during the plan year such as ....your spouse's loss or commencement of employment,.... We also state that the change must be submitted in writing to HR within 31 days of the major life change. Our Company spd was written some time ago, and I'm just not sure if it is something our Company allows or if this is an IRS guideline.

Any input would be very much appreciated!!

FunHRBanker

I would talk to your TPA again. Because our employees are leary of electing too much (or too little) for the upcoming year, I specifically asked if elections could be modified prior to Jan. 1. Our TPA had no problem with that whatsoever. The plan year has not begun so I don't think you'd need a "qualifying event" to modify your election. I can't imagine that ours is the only provider that will change elections before the start of the plan year. All it meant to us was that the employee's FSA debit card would not be ready Jan. 1. Good luck!

NaeNae55

We have late changes all the time. As long as the change is made BEFORE the plan year you are fine. Also, I believe the law covers a change in family status anytime during the year, which this qualifies for.

Further, the law now allows plans to accept mid-year changes in dep care (it must be in your plan) if you have sufficient reason to change it. That is, you can increase it for summer months and decrease it again when school starts.

Check out your plan document and call the TPA again. If they still say no, I would ask to speak to a supervisor. You need to talk to someone who knows what they are doing.

Good luck!

Nae