If I have payroll deductions for medical and child care under my employers section125 plan and my husband was laid off does the change in his employment status allow me to stop my section 125 deductions mid-year.

Yes.

Shot in the Dark--

What's the citation for your answer?

John:

Perhaps I should not have answered so quickly.

Would it not be under 1.125-4?

I would think that the spouse losing employment would, if the spouse also lost health coverage as a consequence, would permit the employee to add coverage for the spouse mid-plan year. But off the top I do not know how the consistency rule is satisfied by allowing the employee to stop payroll reductions for medical benefits mid-plan year.

As to the day care benefits--and maybe that's what your answer, Shot in the Dark, was focusing on--the employee would be allowed a mid-year change to drop these benefits (and payroll reductions for them) because now the spouse can tend the kids and the need for day care to allow the employee to work no longer exists.

Remember two things about this situation, the first is that the spouse would need to have coverage (not just lose employment) and second, "Blue" employer would need to allow for changes.