New FSA Dependent Care Changes for 2021

FSA Dependent Care

At the end of last year, we wrote about COVID’s effect on Dependent Care FSAs and how you could make changes at the end of 2020 to save money.

Well, if you didn’t make changes at that time, or even if you were able to make some changes but still had money left over in your FSA, there is still hope. 

Congress passed new legislation that allows you to better utilize your FSA this year. Due to COVID-19, Congress has provided a lot more flexibility for your dependent care FSA. It’s the most flexible FSA setup I’ve ever seen.

Dependent Care FSA Updates

Specifically, here are the top things to know about your FSA for this year:

  1. You can use any unspent funds from 2020 in 2021. This means that if you still have hundreds or thousands of dollars left in your account from 2020, you can use them this year on eligible expenses. 
  2. You can change your contributions mid-year. If you want to increase or decrease your FSA contributions due to the rollover or changes in your childcare plans for 2021 (perhaps your work is going to stay remote, or due to vaccinations, you can now send your child to daycare), you can change them mid-year.  
  3. If you changed employers, you can still access your 2020 unspent funds. 
  4. The age for a dependent has increased from 13 to 14. This means that if your child was in his/her last year of eligibility for FSA coverage in 2020 (at age 13), you can still use the funds this year when they are 14. 

Remember, a dependent care FSA can be used for eligible child care expenses, including daycare, before and after school care, babysitters/nannies, and even day camp.

Your employer has to elect to offer these benefits to you. So if you haven’t heard from your Human Resources/Benefits department about this, be sure to email them. The full guidance from the IRS is available here

The Bottom Line

Due to these new changes to the 2021 FSA Dependent Care plans, it is worth checking your 2020 FSA for unused funds and increasing or decreasing your contributions depending on your plans for 2021.

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