Any HCE's here using a daycare spending account?

[shaynaatl]

I always contribute $5k to our daycare spending acct. I barely passed the threshold for being an HCE in 2021, so my company told me my limit will be changed to $2500 for 2022. I had no idea that limit was in place. 

I know it's too late now, but could my spouse have contributed $2,500 on his end, so we could have met the $5k limit? If so, I guess we lost out on a decent chunk of tax savings.

[awkwardpenguin]

My wife is an HCE and I was not when I worked. We always had dependent care FSA come out of mine. In addition to not getting our contributions adjusted, I pay FICA every pay period, while she caps out part way through the year, so there are slightly more tax savings.

[Susie]

I'm a HCE and MH is not, so we do the full $5k through H's employer for the reasons awkwardpenguin mentioned.

[treschic]

Luckily they’ve expanded the child care tax credit (at least for 2021, not sure about 2022) to $8000 a child, so that will give you more. They also increased the phase out so hopefully you’ll still qualify.

[janegold]

Yes, he could have. My husband and I are both HCEs, and we each contribute $2500. That's a bummer.

Maybe it's worth your H asking his HR or FSA administrator if they would view that change in your contribution allowance as a qualifying event to allow him to make a mid-year election?

[ellipses84]

Yes, and it may be best if you put it all under his employer in the future if he’s not a high earner or works for a larger company. I was impacted by this one year and had to repay back a bunch of money. I was barely over the threshold for high income earner in HCOL but I worked for a fairly small company where most people didn’t have young children and the ones who did had family taking care of them, so I was one of the few people using the childcare FSA. Maybe the only person that year. Someone quitting and ending their FSA distributions could impact your company ratio and make HCEs ineligible. HCEs weren’t allowed to benefit more than non-HCEs (least that is how it was a few years ago when this happened to me).

[ellipses84]

You’ll still be able to deduct a large amount over $2500 on your taxes without the FSA. While the FSA is a better tax savings for most double income families, it’s not that drastic of a difference, so don’t feel too bad

[Susie]

Jan 20, 2022 13:32:25 GMT -5 ellipses84 said:

Yes, and it may be best if you put it all under his employer in the future if he’s not a high earner or works for a larger company. I was impacted by this one year and had to repay back a bunch of money. I was barely over the threshold for high income earner in HCOL but I worked for a fairly small company where most people didn’t have young children and the ones who did had family taking care of them, so I was one of the few people using the childcare FSA. Maybe the only person that year. Someone quitting and ending their FSA distributions could impact your company ratio and make HCEs ineligible. HCEs weren’t allowed to benefit more than non-HCEs (least that is how it was a few years ago when this happened to me).

I'm in this boat too.  When the limit temporarily went up to $10,500 for 2021, I asked my firm administrator if I could do $5500 to complement MH's $5k election, because initially his employer said they weren't going to allow the increase from $5k to $10,500.  We never reached the merits of whether I could opt in mid-year under these circumstances because I would have been the only participant in the firm (which blew me away; I am not the only parent of young ones) so it was definitely no dice for that reason.

Fortunately H's employer reversed course and did allow the increase for 2021 a few months later, but damn, annoying reminder of those HCE rules in small orgs.

[hbomdiggity]

This came to us as a shock a couple of years ago when H’s company sent him the HCE notice. So I just claimed the whole $5k (seems easier to have one employee do it/deal with reimbursements etc.)

[sent]

What is HCE? We have always done the full $5K through my husband's employer.

[hbomdiggity]

Jan 30, 2022 9:32:01 GMT -5 sent said:

What is HCE? We have always done the full $5K through my husband's employer.

Highly compensated employee.