Dependent Care FSA and Coronavirus

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dignan
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Location: chicago

Dependent Care FSA and Coronavirus

Post by dignan » Thu Apr 16, 2020 5:34 pm

I was wondering if anyone has found any IRS guidance on dealing with dependent care FSA in regards to coronavirus? Let's assume all childcare and camps are closed for the rest of the year. Or let's assume that we can't meet the 5k spending due to the coronavirus circumstances... Anyone have thoughts to this?

boglewill34
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Re: Dependent Care FSA and Coronavirus

Post by boglewill34 » Thu Apr 16, 2020 5:42 pm

I had wondered same so will be following. What’s the $5k stipulation?

BeneIRA
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Re: Dependent Care FSA and Coronavirus

Post by BeneIRA » Thu Apr 16, 2020 5:43 pm

dignan wrote:
Thu Apr 16, 2020 5:34 pm
I was wondering if anyone has found any IRS guidance on dealing with dependent care FSA in regards to coronavirus? Let's assume all childcare and camps are closed for the rest of the year. Or let's assume that we can't meet the 5k spending due to the coronavirus circumstances... Anyone have thoughts to this?
It's been asked a few times if you want to do a search. There is a qualified life event "Change in Dependent Care Cost." For some people, that is now $0 as the daycares have been closed. You can update your amount moving forward to a Goal amount of $0 and you can use what you have already put into the account.

Topic Author
dignan
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Location: chicago

Re: Dependent Care FSA and Coronavirus

Post by dignan » Fri Apr 17, 2020 8:34 am

Thank you, I did search and couldn't find anything before posting my question. Maybe I wasn't using the right search terms...
Last edited by dignan on Fri Apr 17, 2020 4:06 pm, edited 2 times in total.

ZMonet
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Re: Dependent Care FSA and Coronavirus

Post by ZMonet » Fri Apr 17, 2020 8:49 am

What if you have had money deducted but will now (likely) have no opportunity to use the funds?

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ClevrChico
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Re: Dependent Care FSA and Coronavirus

Post by ClevrChico » Fri Apr 17, 2020 8:53 am

ZMonet wrote:
Fri Apr 17, 2020 8:49 am
What if you have had money deducted but will now (likely) have no opportunity to use the funds?
My plan is to use the funds for summer camps that the local museums offer. (If they're open.)

If not used, funds will be forfeited. (If I read the rules correctly, it looks like a company could possibly return the funds to employees at their discretion?)

There is always the possibility of future legislation doing something this year to help. I can't imagine this has much priority right now.

cshell2
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Re: Dependent Care FSA and Coronavirus

Post by cshell2 » Fri Apr 17, 2020 8:57 am

I just emailed our HR today to request withholding be stopped due to the "change in cost" provision. I'm told it's up to the companies discretion if they allow it, so I'm crossing my fingers. I've had about $800 withheld so far this year with only about $400 in expenses. I'm HOPING to be able to use the other $400 later, normally I spend about $2500/year for after school and summer care, but who knows what's going to happen. I certainly don't want them to continue taking it out though.

ZMonet
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Re: Dependent Care FSA and Coronavirus

Post by ZMonet » Fri Apr 17, 2020 9:36 am

ClevrChico wrote:
Fri Apr 17, 2020 8:53 am

If not used, funds will be forfeited. (If I read the rules correctly, it looks like a company could possibly return the funds to employees at their discretion?)
My understanding is that forfeited funds go back to the organization. Something seems intrinsically unfair about that if some allowance isn't made, like allowing carryover to the following year.

yules
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Re: Dependent Care FSA and Coronavirus

Post by yules » Fri Apr 17, 2020 10:23 am

ZMonet wrote:
Fri Apr 17, 2020 9:36 am
ClevrChico wrote:
Fri Apr 17, 2020 8:53 am

If not used, funds will be forfeited. (If I read the rules correctly, it looks like a company could possibly return the funds to employees at their discretion?)
My understanding is that forfeited funds go back to the organization. Something seems intrinsically unfair about that if some allowance isn't made, like allowing carryover to the following year.
No, it’s not necessarily intrinsically unfair for health FSA funds to go to the organization. The general thought is that (from the employer perspective) forfeited funds balance out the loss when an employee uses up the entire year’s worth of FSA, then leaves after, say, 2 months. (Employers cannot deduct the balance from an employee’s final paycheck)

It never balances exactly, and we can debate whether an employer should only absorb losses and employees should never forfeit funds, but this provision was not intentionally established to be unfair.

Take care and be safe,
Yules

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ClevrChico
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Re: Dependent Care FSA and Coronavirus

Post by ClevrChico » Fri Apr 17, 2020 10:26 am

yules wrote:
Fri Apr 17, 2020 10:23 am
ZMonet wrote:
Fri Apr 17, 2020 9:36 am
ClevrChico wrote:
Fri Apr 17, 2020 8:53 am

If not used, funds will be forfeited. (If I read the rules correctly, it looks like a company could possibly return the funds to employees at their discretion?)
My understanding is that forfeited funds go back to the organization. Something seems intrinsically unfair about that if some allowance isn't made, like allowing carryover to the following year.
No, it’s not necessarily intrinsically unfair for health FSA funds to go to the organization. The general thought is that (from the employer perspective) forfeited funds balance out the loss when an employee uses up the entire year’s worth of FSA, then leaves after, say, 2 months. (Employers cannot deduct the balance from an employee’s final paycheck)

It never balances exactly, and we can debate whether an employer should only absorb losses and employees should never forfeit funds, but this provision was not intentionally established to be unfair.

Take care and be safe,
Yules
In my experience, an FSA claim can't be paid until funds have been withheld from a paycheck. (At least at my company.)

boglewill34
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Re: Dependent Care FSA and Coronavirus

Post by boglewill34 » Fri Apr 17, 2020 10:37 am

ClevrChico wrote:
Fri Apr 17, 2020 10:26 am
In my experience, an FSA claim can't be paid until funds have been withheld from a paycheck. (At least at my company.)
I'm a state employee, my health FSA funding is front loaded by the state and I 'pay them off' with weekly contribs.

Like the OP, I'm curious what will happen with dependent care contribs but from reading some providers have provisions for enrollment changes with a qualified event, I'd pitch it by saying that no camps are available. I'm kind of ok though in that I only have one kid left under 13 and I only added $100 of my own money, the state pitched in I think $400 as a free benefit. He wanted to go to middle school prep camp and day camp, if they have it he'll go, if not I lose $100.

MathIsMyWayr
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Re: Dependent Care FSA and Coronavirus

Post by MathIsMyWayr » Fri Apr 17, 2020 10:47 am

yules wrote:
Fri Apr 17, 2020 10:23 am
ZMonet wrote:
Fri Apr 17, 2020 9:36 am
ClevrChico wrote:
Fri Apr 17, 2020 8:53 am

If not used, funds will be forfeited. (If I read the rules correctly, it looks like a company could possibly return the funds to employees at their discretion?)
My understanding is that forfeited funds go back to the organization. Something seems intrinsically unfair about that if some allowance isn't made, like allowing carryover to the following year.
No, it’s not necessarily intrinsically unfair for health FSA funds to go to the organization. The general thought is that (from the employer perspective) forfeited funds balance out the loss when an employee uses up the entire year’s worth of FSA, then leaves after, say, 2 months. (Employers cannot deduct the balance from an employee’s final paycheck)

It never balances exactly, and we can debate whether an employer should only absorb losses and employees should never forfeit funds, but this provision was not intentionally established to be unfair.

Take care and be safe,
Yules
In the case of my former employer, forfeited FSA was used to fund merit scholarships of employees' children.

cshell2
Posts: 419
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Re: Dependent Care FSA and Coronavirus

Post by cshell2 » Fri Apr 17, 2020 11:01 am

ClevrChico wrote:
Fri Apr 17, 2020 10:26 am
yules wrote:
Fri Apr 17, 2020 10:23 am
ZMonet wrote:
Fri Apr 17, 2020 9:36 am
ClevrChico wrote:
Fri Apr 17, 2020 8:53 am

If not used, funds will be forfeited. (If I read the rules correctly, it looks like a company could possibly return the funds to employees at their discretion?)
My understanding is that forfeited funds go back to the organization. Something seems intrinsically unfair about that if some allowance isn't made, like allowing carryover to the following year.
No, it’s not necessarily intrinsically unfair for health FSA funds to go to the organization. The general thought is that (from the employer perspective) forfeited funds balance out the loss when an employee uses up the entire year’s worth of FSA, then leaves after, say, 2 months. (Employers cannot deduct the balance from an employee’s final paycheck)

It never balances exactly, and we can debate whether an employer should only absorb losses and employees should never forfeit funds, but this provision was not intentionally established to be unfair.

Take care and be safe,
Yules
In my experience, an FSA claim can't be paid until funds have been withheld from a paycheck. (At least at my company.)
That's how it is with dependent care FSA, but medical FSA is front loaded and all available on the first day...at least it's supposed to be. I'm sure there are companies out there not following the rules.

cshell2
Posts: 419
Joined: Thu May 09, 2019 10:29 am

Re: Dependent Care FSA and Coronavirus

Post by cshell2 » Fri Apr 17, 2020 11:04 am

yules wrote:
Fri Apr 17, 2020 10:23 am
ZMonet wrote:
Fri Apr 17, 2020 9:36 am
ClevrChico wrote:
Fri Apr 17, 2020 8:53 am

If not used, funds will be forfeited. (If I read the rules correctly, it looks like a company could possibly return the funds to employees at their discretion?)
My understanding is that forfeited funds go back to the organization. Something seems intrinsically unfair about that if some allowance isn't made, like allowing carryover to the following year.
No, it’s not necessarily intrinsically unfair for health FSA funds to go to the organization. The general thought is that (from the employer perspective) forfeited funds balance out the loss when an employee uses up the entire year’s worth of FSA, then leaves after, say, 2 months. (Employers cannot deduct the balance from an employee’s final paycheck)

It never balances exactly, and we can debate whether an employer should only absorb losses and employees should never forfeit funds, but this provision was not intentionally established to be unfair.

Take care and be safe,
Yules
For health FSA yes, but I do think it's unfair for companies under the current circumstances to not allow stopping dependent care withholding. Nobody can use up dependent care funds before they're accrued.

yules
Posts: 84
Joined: Wed Nov 27, 2019 10:31 am

Re: Dependent Care FSA and Coronavirus

Post by yules » Fri Apr 17, 2020 11:34 am

ClevrChico wrote:
Fri Apr 17, 2020 10:26 am
yules wrote:
Fri Apr 17, 2020 10:23 am
ZMonet wrote:
Fri Apr 17, 2020 9:36 am
ClevrChico wrote:
Fri Apr 17, 2020 8:53 am

If not used, funds will be forfeited. (If I read the rules correctly, it looks like a company could possibly return the funds to employees at their discretion?)
My understanding is that forfeited funds go back to the organization. Something seems intrinsically unfair about that if some allowance isn't made, like allowing carryover to the following year.
No, it’s not necessarily intrinsically unfair for health FSA funds to go to the organization. The general thought is that (from the employer perspective) forfeited funds balance out the loss when an employee uses up the entire year’s worth of FSA, then leaves after, say, 2 months. (Employers cannot deduct the balance from an employee’s final paycheck)

It never balances exactly, and we can debate whether an employer should only absorb losses and employees should never forfeit funds, but this provision was not intentionally established to be unfair.

Take care and be safe,
Yules
In my experience, an FSA claim can't be paid until funds have been withheld from a paycheck. (At least at my company.)
This is true for dependent care FSA, but you should have access to health FSA from day one. Search for “uniform coverage rule” and/or check out this IRS explanation: https://www.irs.gov/pub/irs-wd/1012060.pdf

Take care and be well,
Yules

BeneIRA
Posts: 834
Joined: Sat Nov 29, 2014 8:43 pm

Re: Dependent Care FSA and Coronavirus

Post by BeneIRA » Fri Apr 17, 2020 11:38 am

ClevrChico wrote:
Fri Apr 17, 2020 10:26 am
yules wrote:
Fri Apr 17, 2020 10:23 am
ZMonet wrote:
Fri Apr 17, 2020 9:36 am
ClevrChico wrote:
Fri Apr 17, 2020 8:53 am

If not used, funds will be forfeited. (If I read the rules correctly, it looks like a company could possibly return the funds to employees at their discretion?)
My understanding is that forfeited funds go back to the organization. Something seems intrinsically unfair about that if some allowance isn't made, like allowing carryover to the following year.
No, it’s not necessarily intrinsically unfair for health FSA funds to go to the organization. The general thought is that (from the employer perspective) forfeited funds balance out the loss when an employee uses up the entire year’s worth of FSA, then leaves after, say, 2 months. (Employers cannot deduct the balance from an employee’s final paycheck)

It never balances exactly, and we can debate whether an employer should only absorb losses and employees should never forfeit funds, but this provision was not intentionally established to be unfair.

Take care and be safe,
Yules
In my experience, an FSA claim can't be paid until funds have been withheld from a paycheck. (At least at my company.)
For a Health Care FSA, you are able to use the entire goal amount on day 1. You can then quit on day 2 and voila, you profited. For a Dependent Care FSA, it is kind of like a bank account and you can't use the money in the account until it is actually deposited into it.

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