Contribution limits when switching dependent care FSA providers to spouse’s plan when plan years overlap

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exces6
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Joined: Wed Jun 29, 2016 2:09 pm

Contribution limits when switching dependent care FSA providers to spouse’s plan when plan years overlap

Post by exces6 » Mon Jul 15, 2019 12:23 pm

My wife and I currently have different health insurance plans from each of our employers. I currently have a dependent care/limited purpose FSA (with an HSA) that is set to the MFJ max contribution of $5000. My employer uses the calendar year as the plan year (1/1/2019-12/31/2019), and contributions are only available as they are made (meaning I can only request reimbursement every few months once enough accrues to cover a month’s worth of day care).

I’d like to switch to the FSA provider my wife’s employer uses, as they pre-fund the plan on day 1, making it easier to deal with since I can request reimbursements regularly for a few months then never think about it again until the plan resets. However, her employer is enrolling now for a plan year running 9/1/2019-8/31/2020. Not sure if it matters, but her health insurance plan is a PPO.

Does anyone know what contribution amount I’m allowed to elect under my wife’s plan, given that the first 3 months of her plan year overlap with the last 3 months of my currently funded plan? I won’t be able to discontinue my FSA contributions until my employer’s next plan year (starting 1/1/2020), but if my wife’s employer starts making contributions/payroll deductions starting 9/1/2019, I’ll have contributed more than $5k in the 2019 calendar year.

I’ve read a lot on the IRS defining years as “plan years”, which makes me think I can just do $5k on each plan, but Pub 969 just references “years” in the FSA section, and I don’t want to learn the hard way if there is a penalty for overcontributing. The alternative would be to discontinue my plan effective 1/1/2020 and sign up for my wife’s plan effective 9/1/2020, but then I’ll miss out on making the maximum contribution (and therefore I’d rather just put up with the minor inconvenience of my current plan). All of the other posts I’ve found deal with switching from FSA to HSA, which isn’t what I’m trying to do, so hopefully this post isn’t redundant.

Thanks!

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