Q.- An employee’s husband’s employer is restricting his contributions to their dependent care FSA starting immediately (they must have failed nondiscrimination testing). The employee wants to know if she can enroll in our plan mid-year because of this.
A.- Maybe, if allowed by the terms of your plan. A plan may be drafted to allow a participant to make certain election changes midyear on account of a change in coverage under another employer plan.
If provided in the plan documentation, the IRS would allow the employee to elect your Dependent Care FSA coverage midyear when her husband’s employer stops his dependent care FSA contributions for the remainder of the year. The applicable midyear change event is "change in coverage under another employer's plan" which does not apply to health FSAs, but can apply to dependent care FSAs.
