A pregant employee elects Day Care and has been making contributions. However, as the blessed event arrives, she realizes that she's going to be a stay at home mom, possibly through the end of the plan year and she may no longer be employed by the company afterwards. Are there any creative ways to spend the money she's already contributed in this case? She has no other children and there are no elders to take care of.

Since the child care is to allow the parents to work, if she is not working or disabled or going to school, you may get creative but you won't be legal.

LOL! Well I thought legal was implied. But I think I know this well enough to know that finding something creative and legal will be highly unlikely. Just thought I'd pick your brains (reimbursable under your MFSA).

I am glad your intention under "creative" implies legal. Too often a request for "creative" means "the best way to avoid getting caught" or "give me something to argue if I get caught."

Since she had no children (and therefore no need of daycare) at the time of election, could you call it an administrative error and pay her back?

Wouldn't the pregnancy kind of undermine that?

None. This is tax rules for FSAs 101, or should I say the poster child for carefully thinking through all issues before making an election.

If I were advising the employee, I would find out if she has any colorable claim against the employer for having mislead her or not giving her complete information about the use it or lose it feature. Assuming there is a basis for at least a colorful claim, I would contact the employer and say that my client has this colorable claim and also suggest how the employer may settle the claim without putting the integrity of its dependent care plan/fsa at risk. If the employer is sympathetic it may be looking for a viable way to give the money back to the employee and having a threatening letter from a former employee's lawyer in its file may be the hook on which it can hang its hat.

Who in their right mind ever suggested she contribute to DCFSA prior to the birth?

It's just not done. It's not something i've ever ever heard of anyone doing in the course of enrollment or administration.

After birth, a qualifying event, is the only time I would recommend anyone begin funding DCFSA. Too much changes during that time and the cost is too high to put at risk.

Electing DCFSA prior to the birth of the child is not something I've ever heard of anyone doing in the course of enrollment or administration.

It's always an election deferred until after the birth, a qualifying event allowing the election change.

The more I think about it, there would be problems with dates of service and claims if the funding and effective dates are also prior to the birth. I don't understand how such an election is possible, or how it would be possible administratively.

If I were the participant, I would argue that someone was deficient in their administrative duties, and I'd say it often and loud until something was done to provide me with administrative reliefe.

In fact the birth of the child is a qualifying event allowing the participant to make an election change, no need to be creative.