Q.- An employee enrolled in the dependent day care FSA for 2014 because his child was attending daycare. The child was just evaluated for learning disabilities and has transferred to a school that provides care for the child at no cost to the employee. May the employee cancel his Dependent Care FSA election mid-year since he no longer has day care expenses?
A.- Yes, if permitted by the terms of your plan. Informal IRS guidance supports allowing the employee to cancel his DC FSA election mid year. The reason would be "a significant cost change." IRS officials have commented that this rule is broad enough so that no longer needing dependent care would allow the election change.