Higher DCFSA limits for 2021

[simpsongal]

I realize the American Rescue Plan Act just passed, but have any of you heard from your employers about the higher DCFSA limits for 2021?  They increased from $5K to $10500

A PSA of sorts too - there are other changes for dependent credits and whatnot too.  I'm sure there will be more news coverage coming out about the changes (most coverage seems to be focusing on the stimulus checks).

[Cappy]

Wow! Thank you for the notice. I had not heard that. We'd opted out for 2021 due to so much uncertainty with care needs, but that bump could be amazing moving forward. Our childcare costs are normally around 20k/year, so well beyond that 5k. I'll have to think about strategy moving forward.

[raangoli]

I had not heard this either - we take the deduction from MH's salary, so I will have to ask if he's heard of anything.

[Susie]

Oooh nice!  I'm not expecting to get a stimulus payment so I kind of tuned it out, but doubling dependent care flex spending is nice.  I'll have to ask H to check with HR about increasing contributions to take advantage of the much increased max.

[af1212]

My understanding is the tax law allows it but your employer does not have to. Am I wrong?

[simpsongal]

Mar 15, 2021 10:34:00 GMT -5 af1212 said:

My understanding is the tax law allows it but your employer does not have to. Am I wrong?

I'm not sure...if I stumble on it I'll post.  I skimsed this linked article, which had a lot of scenarios and the answer may be contained within.  Reading that the $5K DCFSA hasn't changed since 1986 made my blood boil.  Congress really needs to index this stuff to account for inflation (ahem, minimum wage!).

[awkwardpenguin]

There's also a huge change to the child and dependent care credit - it has increased from a maximum of $1050 for one child and $2100 for two ore more children to $4000/$8000, and has been made fully refundable. The income limits on the phase out have changed as well. So you have to re-run the math on which is more beneficial - taking the credit or using the increased DCFSA.

[ohgillian]

Mar 15, 2021 10:34:00 GMT -5 af1212 said:

My understanding is the tax law allows it but your employer does not have to. Am I wrong?

I think this is correct. 

[gt7301b]

Oh this is exciting!  I hope my employer will allow the increase.  We go through the daycare FSA in the first could of months.

[sicilygirl]

Here are the changes related to the Child and Dependent Care Credit:

Qualifying expenses are $8,000 for one child and $16,000 for two or more.
The credit is worth up to 50% of qualifying expenses.
The phasedown begins at AGI of $125,000.
The 50% credit is reduced by 1% for every $2,000 that AGI exceeds $125,000, down to 20%.
Those with AGI between $185,000 and $400,000 will get a credit for 20% of qualifying expenses.
For those with AGI > $400,000, the phaseout begins again in the same method as above.
So no credit for those with AGI > $440,000. There did not used to be an upper limit, so this is new.

[ellipses84]

That’s interesting! I hadn’t heard about that although I don’t have access to a DFSA at the moment.

Also, while there may not have been an income cap before, there was a highly compensated employee clause for DFSA. Basically, an employee who makes over x amount couldnt benefit from an FSA more than other non-highly compensated employees. I found this out the hard way the first year I used a DFSA because I just got a promotion to low six figures in HCOL, our DFSA was new, I was in a male dominated field at an employer where hardly anyone had young kids, most people were highly compensated due to HCOL and I was only one who opted to use the DFSA. They found out when they got a new HR person who did an audit and I had to pay all the money back. At later jobs I made less $$ and had more coworkers with kids, so I never had that issue again.

[cherry1111]

I have heard nothing about this from my employer. A permanent increase on this is long overdue.

[steamboat185]

Our daycare sent out an email, but we’ve had nothing from either employer. I’m hoping they send something out soon.

[Poppy]

Uuuggh I don't know if I can change my enrollment now. I'm also now worried that I screwed up by opting out of DCFSA in favor of the tax credit. Why do they have to make this so hard?

[noodleoo]

This would be amazing! Daycare is so expensive, we went through the $5k in 2 months. But we've heard nothing from our employers about this. What's the point of changing it if employers don't have to update it? I'm hoping it is too soon and they will offer it at some point.

[icedcoffee]

I don't understand why an employer wouldn't offer it. What would be the benefit to them of not offering the increased limit?

[ohgillian]

Mar 17, 2021 8:33:26 GMT -5 icedcoffee said:

I don't understand why an employer wouldn't offer it. What would be the benefit to them of not offering the increased limit?

I'm also wondering this, because employer's save $$ (employer share of FICA) when employees contribute. 

[milang]

What about my unusable $600 that's sitting in the FSA from last year? 

[lizrd7579]

Mar 17, 2021 8:48:02 GMT -5 milang said:

What about my unusable $600 that's sitting in the FSA from last year? 

My employer came out and said we're able to use 2020 DCFSA in 2021. Unfortunately for us, DH is now permanent WFH and we don't need before/after care anymore. So I think we'll completely lose it.

Also, for those who have already done the previous $5k limit, wouldn't this be considered an event where you could change your benefits? I know once covid hit, we were able to stop our withdrawls last year. But I guess that's up to each employer.

[ohgillian]

Mar 17, 2021 9:55:49 GMT -5 lizrd7579 said:

Mar 17, 2021 8:48:02 GMT -5 milang said:

What about my unusable $600 that's sitting in the FSA from last year? 

My employer came out and said we're able to use 2020 DCFSA in 2021. Unfortunately for us, DH is now permanent WFH and we don't need before/after care anymore. So I think we'll completely lose it.

Also, for those who have already done the previous $5k limit, wouldn't this be considered an event where you could change your benefits? I know once covid hit, we were able to stop our withdrawls last year. But I guess that's up to each employer.

Yes, Congress authorized this in that big year-end appropriations bill - but employers still have to choose to allow it. I'm glad yours did. I'm not sure mine did (prob didn't), luckily I was just barely able to use all of mine.

[hbomdiggity]

Long overdue. That said, now that we are out of daycare and it’s only summer camps and aftercare (starting back in April) I think we will struggle to even get to $5k.

[milang]

Mar 17, 2021 11:39:40 GMT -5 ohgillian said:

Mar 17, 2021 9:55:49 GMT -5 lizrd7579 said:

My employer came out and said we're able to use 2020 DCFSA in 2021. Unfortunately for us, DH is now permanent WFH and we don't need before/after care anymore. So I think we'll completely lose it.

Also, for those who have already done the previous $5k limit, wouldn't this be considered an event where you could change your benefits? I know once covid hit, we were able to stop our withdrawls last year. But I guess that's up to each employer.

Yes, Congress authorized this in that big year-end appropriations bill - but employers still have to choose to allow it. I'm glad yours did. I'm not sure mine did (prob didn't), luckily I was just barely able to use all of mine.

Thanks, I didn't know that. I'll check with my employer.

[gretchenindisguise]

Mar 17, 2021 9:55:49 GMT -5 lizrd7579 said:

Mar 17, 2021 8:48:02 GMT -5 milang said:

What about my unusable $600 that's sitting in the FSA from last year?  [img src="//storage.proboards.com/forum/images/smiley/embarrassed.png" class="smile" alt=""]

My employer came out and said we're able to use 2020 DCFSA in 2021. Unfortunately for us, DH is now permanent WFH and we don't need before/after care anymore. So I think we'll completely lose it.

Also, for those who have already done the previous $5k limit, wouldn't this be considered an event where you could change your benefits? I know once covid hit, we were able to stop our withdrawls last year. But I guess that's up to each employer.

. You can also use it for summer camps.

[cherry1111]

I opened a ticket with HR to ask if they were going to make the change and the agent working my ticket came back and said no.

[ohgillian]

Mar 24, 2021 16:27:53 GMT -5 cherry1111 said:

I opened a ticket with HR to ask if they were going to make the change and the agent working my ticket came back and said no.

I'm sorry. That's so maddening. They would literally MAKE MONEY if you they let you put more money into the flex b/c they'd save the employer share of payroll taxes. 

[cherry1111]

Mar 24, 2021 17:05:20 GMT -5 ohgillian said:

Mar 24, 2021 16:27:53 GMT -5 cherry1111 said:

I opened a ticket with HR to ask if they were going to make the change and the agent working my ticket came back and said no.

I'm sorry. That's so maddening. They would literally MAKE MONEY if you they let you put more money into the flex b/c they'd save the employer share of payroll taxes. 

Yeah I guess they would have to pay our benefit administrators something to make the change but it really seems like a low cost (or in your example a money maker) way to make your employees happy. I’m hoping maybe this agent just didn’t dig for an answer and they may still change it.

[janegold]

This is exciting! $5k doesn't even cover 2 months for us.

That being said, I doubt my employer will offer it, at least not to attorneys. As it is, we are only allowed $2500 as "highly compensated employees." Luckily we can make up the other $2500 through my husband's employer; wonder if he will be eligible for the increased limit through his job.