Dependent Care Reimbursement

jamesray

My friend patricipates in his company's cafeteria plan and has pre-tax deduction for dependent care. Recently his wife changed her work hours and they no longer need to put their child in day care. He wants to stop his dependent care deductions. Would this be a qualifying event? His employer says it isn't and he cannot stop his deduction until the plan year ends.

Down_the_Middle

The employer is correct. A simple change in scheduled hours does not qualify for a mid year change in deductions. The reduced hours must be so substantial that the employee no longer qualifies for the DCA or results in termination. Use caution about "giving someone some slack" with this, cuz the there are lots of observers and you'll be bombarded with numerous other requests to bail out mid-yr.

Lori B

Actually, this was loosened up in the new regs of a year or so ago. A change in day care provider cost is a qualifying reason now for mid year changes. This rule, which used to be very harsh, is now quite flexible. It sounds like the employer hasn't amended their plan docs to comply yet. I'd have your friend push for more info, especially if a TPA is involved.

Down_the_Middle

I agree with your comment about changes in day care cost, but I thought a different question was being asked. The employees reduction in hours must involve a change in status (FT to PT) and affect eligibility or coverage. The plan document, as you suggest, should provide guidance.

SandiF

Our plan allows for changes with a change in employment status - going from full-time to part-time or part-time to full-time. These are fairly recent changes - in the last year or two. There are several reasons you can make changes mid-year. Your friend definitely needs to check in the plan document.

franfields

Our plan document allow for a change in dependent care when the cost of dependent care changes, period.