Dependent care FSAs could be eliminated under tax reform

Personal Finance

About nine in 10 employers offer dependent care FSAs, according to benefits administrator Alight Solutions. (It ran numbers based on its portfolio of 250 mid-size and large employers.) About 3 percent of eligible employees use them, with average annual contributions of $3,500, said Nicole Wruck, Alight’s national health practice leader. (Midway through open enrollment this year, use is up slightly at 4 percent of eligible employees.)

“Those that contribute tend to contribute year over year over year,” she said. “When we think about it, it’s going to hit the bottom line for those employees.”

Families’ loss may be bigger than the tax break. Some employers offer matching funds or other contributions to employees participating in dependent care FSAs, McCready said. Without the tax benefit, companies would need to amend or discontinue those perks, she said.

FSA accountholders decide during open enrollment how much to set aside for the following year. Typically, you can’t change that amount unless your plan allows for that after a “qualifying event” such as the birth of a child.

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