My company was purchased and is closing this week. I contribute the max to my DCFSA (due to very expensive summer camps) that I have already paid for, but will not occur until the summer. I have tried to submit for reimbursement with our DCFSA administrator, but they said they cannot reimburse because the camp has not occurred.
Additionally, my current company is now saying that the benefit period no longer covers all of 2026, but only up through my last date of employment with them. The new company doesn't appear to have a DCFSA. Am I just out $2500? I have requested a taxable event refund, but my current company appears not to want to do that.
Do I have any recourse?
Company bought out, changed the benefit period for my dependent care FSA (DCFSA). Saying I will lose my contributions!
byu/Possible_Isopods inpersonalfinance
Posted by Possible_Isopods
2 Comments
Termination from an employer, yes, the FSA money you’ve paid in you would lose. It’s why in general you should plan to spend your full FSA as soon as possible in the year in case you are suddenly fired and walked out. I know this is hard with dependent care as you have to get expenses first.
The new company is hiring you into their plan, and the old company is closing their plan. This is one of the risks of FSA’s. You can submit expenses you incurred during the year before the company closed.
Dependent Care is also a pain. Yes, what you paid in you lose, and you won’t be able to pay in that same money even if the new company had a DCFSA: the contribution limit is across *all* employers for the year.
And yes, DCFSAs will only reimburse *after* care is provided, not when you pay for it, unfortunately.
Qualified expenses must occur during the DCFSA coverage period. When you’re removed from the plan, that “effective end date” is the cut-off, not December 31. And that’s based on service date (attending camp), not just when you paid. There’s sometimes some wiggle room when there’s a gap between payment/service, but usually only when those cross tax years (payment in December 2025 can be reimbursed when service eventually happens in 2026). Your conversation with the administrator probably means your out of luck for that future expense.
Did you have **any** eligible child care expenses that happened between Jan 1 and the end date of the plan? When a plan ends, especially in circumstances like this when its mid-year, there’s usually a window beyond the end of coverage where you can still submit reimbursement paperwork for prior expenses. Daycare (including registration fee), school after care program, daytime nanny? DCFSAs are strictly for allowing you/spouse to work, so a babysitter for a child free night out with you + spouse would not qualify.
Unfortunately this is one of the risks of an FSA that doesn’t always get pointed out when you enroll.
As a small consolation, not being able to use your $2500 contribution is only a “loss” of about $2000 in terms of your take-home pay. You don’t owe income/payroll tax on those dollars of income, so nothing was withheld, so your take-home pay reduction ends up smaller than the dollars shifted into the DCFSA. Still sucks to lose, but maybe sucks a little bit less.