Q.- It is open enrollment for our flexible spending account plans. We have an employee who is getting divorced. He is financially responsible for his children, but they will stay with him on weekends, only. He wants to know if he should enroll in our dependent care FSA and get reimbursed for the amount he spends on day care for his children while they are at their mother’s house.
A.- No. Your employee is not the custodial parent for dependent care FSA purposes. A Dependent Day Care Flexible Spending Account Plan may reimburse expenses only for qualifying individuals. A qualifying individual must have the same principal place of abode as the employee for more than half of the year. In a divorce situation, a child is a qualifying individual with respect to the custodial parent. This is the parent having custody for the greater portion of the calendar year (the parent with whom the child resides for the greater number of nights during the calendar year). If the number of nights with each parent is the same, the parent with the higher adjusted gross income is treated as the custodial parent.
A divorce decree does not determine custody for DFSA purposes, nor do the DFSA rules take into account financial responsibility for the child, or which parent claims the child on his/her tax return. Custody (number of nights in the home) is the determining factor for DFSA reimbursement eligibility. If the children stay with your employee on weekends, only, he is not the custodial parent even if he has financial responsibility for the children.