Dependent Care FSAs While Working From Home

COVID-19
There have been quite a few questions that have come up recently on whether people can continue using their Dependent Care FSAs for child care expenses if working from home?

The answer is yes.  Employees can continue using their Dependent Care FSAs provided that the child care is required for the employee to be able to work. For instance, employees working full time may need the same child care whether working from home or the office. If, however, the employee or spouse can care for the child while the employee works, the expenses are not reimbursable.

Another question that has come up is whether or not employees can change their Dependent Care FSA election due to the COVID-19 issues?

The IRS rules for Dependent Care FSAs set forth a list of permissible election changes. (Ref: 26 CFR § 1.125-4.) Assuming the employer includes all IRS-permissible change events in its plan document, employees may start, stop, increase or decrease their Dependent Care FSA contribution on account of specific events. Examples of events that are likely to come up due to COVID-19 issues include:
  • The dependent care center or provider is no longer available;
  • The employee needs child care because the schools are closed; or
  • The employee’s or spouse’s employment status or work hours are changed.