As a rule, you can’t change your Dependent Care FSA election amount during your plan year. You should plan on an election amount to your Dependent Care FSA that suits your needs for the entire plan year.
But there are circumstances—called changes in status or qualifying events—when you can make changes, if your employer’s plan permits them. The IRS determines what counts as a change in status or qualifying events. They typically include:
It’s important to note that if you leave your company, any money left unspent in your Dependent Care FSA generally stays with your company. But if you quit or are terminated from your job and you still have money left in your account, you may be able to spend down your account. Check with your benefits administrator about options for the remainder of your plan year.
There are additional special circumstances that allow you to change your Dependent Care FSA election amount.
The most common of these is when a child or relative stops being a “qualifying child or relative,” as defined by the IRS. This occurs when:
Let’s look at an example.
Let’s say your employer’s plan year runs from July 2, 2015 through June 30, 2016, and you will be covered for the entire plan year.
Your daughter is a qualifying child until her thirteenth birthday on March 1, 2016. She is not considered a qualifying child or relative after March 1, 2016 because she will have “aged out.”
The dependent care services provided for your daughter between July 1, 2015 and February 28, 2016 are eligible to be paid from your account. The dependent care services provided for your daughter on March 1, 2016 and later are not eligible because she is not a qualifying child or relative at the time the services are provided.
This same example applies for a qualifying relative who becomes capable of self-care on March 1, 2016.
If your employer’s plan allows all federally-recognized changes, both events (your daughter’s birthday or an adult relative becoming capable of self-care) are considered Qualifying Life Events that allow you to change your Dependent Care FSA election amount or cancel your enrollment during your plan year.