What to Do With Your FSA Contributions If Your Day Care Center Is Closed

The physical distancing measures triggered by the coronavirus pandemic have made all your childcare plans uncertain. Will your kindergarten reopen? If so, would it be safe to send your children there ? What will happen to before and after school? And if you were planning on paying for all of this with the Flexible Dependent Care Cost Account (FSA), you’re probably wondering if you might be losing some of the money you put aside to make it easier to pay those costs.

What’s new in the FSA

In light of the pandemic, the IRS has adjusted its rules to make it easier for people to get the benefits they need. Employers now have the ability to offer their employees a mid-year open enrollment period, allowing people to change, add, or remove health insurance and related coverage without having to prove they had a related life event to warrant change.

Watch out for two other changes that may affect your FSA:

  • If your employer allows you to carry over unused funds to the next year, you can now roll over $ 550 instead of $ 500. The maximum contributions are the same: $ 2,750 per family for FSA health coverage and $ 5,000 for dependents.
  • If your employer offers a grace period, meaning you have a few extra months to spend last year, he can now give you until the end of 2020 to spend those contributions.

Your employer can only offer one of these options if they offer something in this regard.

“The new regulation is an attempt to remove some of the FSA’s restrictions,” said Craig Keohan, director of revenue for HSA services company HealthSavings . “In many ways, the changes highlight the FSA’s limitations because it is an employer-sponsored use-or-lose fund.”

These changes are not automatic

If your employer is announcing another open enrollment period, this is a great opportunity to examine your medical and dependent care needs and adjust your coverage to match your finances. But there is no guarantee that your employer will make an offer.

“The FSA is really owned and developed by an employer,” said Shobin Uralil, co-founder and chief operating officer of Lively, a health savings account company. “There are many regulatory compliance issues an employer needs to consider.” He explained that during a pandemic, employers will not be able to take on this extra work.

If you are worried about your contribution settings or overall benefit coverage right now, don’t wait to hear more from your HR department – ask them if they will be running another enrollment period. And keep in mind that there may be other changes in the future.

“We work in a world where there is more unknown than known,” Uralil said. “I don’t think we have heard the latest IRS news on the coronavirus.”

What if you can change your benefits

If you don’t think you’ll need babysitting anytime soon – or if you need some extra cash in your pocket right now – Uralil said you might want to stop making contributions. Just keep in mind that the cash in your paycheck will be tax deductible as opposed to your FSA contribution.

But if you think you need help before the end of the year, you can keep your current contribution level or even increase it.

And if your employer renews this enrollment period, it might be worth considering other options for your coverage. If you can switch to a high deductible health plan, you can open a Health Savings Account (HSA) that allows you to save pre-tax dollars without worrying about “spend or lose” – your premiums will stay with you year after year. year even if you quit your job.

This may not help with your immediate childcare costs, but shifting your medical contributions can provide some long-term stability and comfort in the face of these short-term fluctuations.

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