How to Cancel Your Dependent Care FSA

A Dependent Care Flexible Spending Account (DCFSA) offers a tax-advantaged method for individuals to manage eligible dependent care expenses. This account allows participants to set aside pre-tax dollars from their paycheck to cover costs like daycare, preschool, or summer day camp, reducing taxable income. While annual contributions are typically set for an entire plan year, specific life changes can permit an individual to modify or cancel their election outside of the usual open enrollment period. These accounts help working individuals afford care for qualifying dependents, such as children under age 13 or adults incapable of self-care.

Understanding Qualifying Life Events

Changing a Dependent Care FSA election mid-year is generally only permissible if an individual experiences a “Qualifying Life Event” (QLE). A QLE signifies a significant alteration in family or employment status, as defined by IRS Section 125 regulations. Without a recognized QLE, participants are typically bound by their initial election for the entire plan year, adhering to the “use-it-or-lose-it” rule for these accounts.

Several common QLEs include a change in marital status, such as marriage, divorce, or legal separation. A change in the number of tax dependents also qualifies, such as the birth or adoption of a child, or the death of a dependent. Changes in employment status for either the employee or their spouse, like starting or stopping work, a shift from full-time to part-time employment, or taking an unpaid leave that impacts benefit eligibility, are also QLEs.

A significant change in the dependent care provider or the cost of care, if it substantially impacts the FSA’s need or amount, is a QLE. If a dependent no longer meets eligibility requirements, such as a child turning 13, this is also a QLE. Any requested change to the DCFSA election must be consistent with the QLE’s nature; if a child turns 13, the election can only be reduced or canceled, not increased. Most QLEs require the change request be submitted within 30 to 60 days from the event date.

Navigating Your Dependent Care FSA Funds and Options

Before changing or canceling your Dependent Care FSA, gather necessary information and understand the implications for your funds. Start by contacting your employer’s Human Resources or benefits department, or your FSA plan administrator. They have the plan-specific rules, forms, and procedures that govern your account.

When communicating with your administrator, have certain information readily available. This typically includes your employee identification number, specific details of your DCFSA plan, the exact date of your QLE, and a concise description of the event. State the desired change: cancellation or reduction. An “election change form” or similar documentation will likely be required, available from HR or the administrator’s website.

Upon approval, future payroll deductions for your DCFSA will cease or be adjusted. Dependent Care FSAs operate under a “use-it-or-lose-it” rule, meaning funds not used for eligible expenses by the plan year’s end, or within any applicable extension, are generally forfeited. However, many plans offer a grace period, typically extending up to two and a half months, allowing you to incur eligible expenses during this extended time.

A “run-out period” is common, providing participants a window after the plan year ends or employment termination to submit claims for expenses incurred prior to the end of the plan year or grace period. Canceling future contributions does not eliminate existing funds; these remain available for eligible expenses incurred before cancellation or within any grace period your plan provides. Funds already contributed and reimbursed remain tax-free, as they were pre-tax.

Formalizing Your Election Change

After understanding QLE criteria and gathering all necessary information, formally submit your request to change your Dependent Care FSA election. Submission methods vary by employer’s benefits system. Many employers use online portals where you can log in, navigate to the benefits or FSA section, select your DCFSA, and initiate a change. This often involves uploading supporting documentation for your QLE and confirming electronically.

For plans relying on physical documentation, a paper election change form must be completed. This form typically requires your signature and the date of your qualifying event. Once completed, return the form to HR, mail it to the plan administrator, or submit via fax or secure email, as permitted. For complex situations, a direct conversation with HR or the plan administrator may be required.

Expect and retain confirmation that your request has been processed. Confirmation may be an email, letter, or updated paystub reflecting adjusted or ceased DCFSA deductions. Keeping a record of this confirmation is important for your personal financial records. If you don’t receive confirmation within a reasonable timeframe, or if the change isn’t reflected on your paystub, follow up with HR or the plan administrator.