During the pandemic, many are faced with a new normal. This new normal could mean working from home or being unemployed, and for schools and daycares it could mean being closed for the foreseeable future. These changes have greatly impacted employers across the country, as well as the benefits they offer employees. One benefit that can be cause for questions is the Section 125 Cafeteria Plan - Dependent Care Assistance Plan.
The BASE® Dependent Care Assistance Plan is a benefit that helps employees pay for the necessary care of a qualified dependent while the parent works. It allows employees to use their tax-free dollars to pay for child day care or elder day care expenses. This 125 Cafeteria Plan option allows an employee to be reimbursed for their eligible dependent care expenses so that the employee can continue to work, look for work, or attend school full-time.
In order to meet the requirements for DCAP employees must:
- Be gainfully employed
- Have a qualifying dependent
- Use the funds for care and not education
- Incur the cost during the coverage period
- Submit expenses to be substantiated
With the current public health crisis, many employees are unable to meet one, or more, of the requirements that allows them to continue to contribute to their DCAP – being gainfully employed and/or having childcare. Because of this, employers are now having employees wanting to make changes to their plan.
Employers should always refer to their plan document before making any midyear election changes to determine whether such changes are allowed. A qualifying event must occur for a change in DCAP election. Employers are seeing an increase in these qualified events, which include a change in work status (the employee is no longer gainfully employed), the funds for care (the daycare is closed and funds are no longer used), and/or FMLA (which will be reinstated when employee returns from their absence).
With all the varying circumstances employers are facing during this time, it is important for employees to visit with their employer regarding what is allowable. If election changes are eligible, participants typically have 30 days from the date of the qualifying event to submit their request. For more information on the BASE® Dependent Care Assistance Plan, call 888.386.9680 or visit the website.