Q.- An employee’s wife lost her job. She is going to watch their kids instead of sending the kids to day care. May our employee stop participating in the Dependent Day Care FSA now even though it is not open enrollment?
A.- Yes. If the employee is no longer using a dependent care provider and if the spouse is now watching the child, that event is a permitted mid-year election change under IRS rules. The employee may cancel his dependent care election going forward. In fact, it seems as if he is no longer eligible for the dependent care FSA since his wife is not working and his future contributions should be cancelled. He can be reimbursed for expenses incurred up until the date the wife started watching the child.