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Should I enroll in Day Care Flex?

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Hey Folks,

We got a surprise birth recently and am going over my work benefits for updating. She is coming in very early and will likely need anywhere between 2 and 3 months in the NICU, so this is definitely going to change our original plans for taking time off, etc...

One benefit that I am considering is Flexible Day Care. After mom takes time off, and I take time off, we are looking at atleast 2 (possibly up to 4) months in the year where we will need some kind of care for our child. To throw a wrench into things, the mother in law is currently on her way down here to help with mom in the hospital, and she has expressed that she wants to move down here with us to live locally to see us and the baby.

Mother in law is mostly broke, but would be great at watching over the baby for us. She works retail part time to bring in income. We have been considering our options below:
1) Day Care - We are already setup and registered to enroll our child at a Daycare that costs $250/week. We originally told them we plan to start in November (and that's when they have their opening) BUT - That was with our original planned delivery of approximately mid June. So we're going to burn through our vacation and paternity leave much sooner than anticipated.
2) Mother in Law - She may very well move down here. At this point, I'm not 100% Sure so it's up in the air. We will probably know more when she gets here to help. I don't mind paying her either too use a flexible spending benefit, not that I would have to - she would definitely do it for free.
3) Hire a nanny. Another thought of ours is to hire a personal nanny for a period of time. Maybe something to the tune of Mother in Law looks over the child until 2:00, then MIL goes to work - Nanny comes in and watches baby for remaining 4 hours in the day.


Couple Other Questions:
I am looking to add my baby to benefits, but the form is asking me for my election options. Since I have ~31 days to report it, can I make changes to my benefits after I submit the form a first time?
Or should I just delay reporting the form to my employer until I am more certain about my benefit elections?

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rated:
justignoredem said:   1) Day Care - We are already setup and registered to enroll our child at a Daycare that costs $250/month.
  Are you missing a "0" at the end?
ETA: If you can wing it, delay putting baby in day care for the first year. I know having MIL take on that responsibility (at least partially) may come with its own issues. But that is certainly something to strongly consider, provided she will indeed take good care. There is something to be said for having the baby taken care of in your home by someone who will be totally capable/dedicated etc. (assuming MIL is that person) during the first several months to a year.

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Agreed, that is ridiculously cheap, especially for infant daycare. I think I paid $600 when I lived in a low cost of living area, and around $1100 in a higher cost of living area...

Sorry to hear about the complications, best of luck.

You should be able to change your benefits anytime there is a qualified change reason (i.e. having a child). Typically you add the child to your insurance after they are born, and insurance/hospital coordinate the billing.

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When I had my son I had 30 days after he was born to change my elections. I suppose every employer is different but that appears to be rather normal. It is considered a life event to most insurance plans.

FSA was tough for us to calculate as we had already planned everything out, but I knew a few folks that changed their mind after the baby was born. Is the baby not going to daycare daily? $250 seems low.

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Sorry folks, I meant 250/week. I naturally by default think things like this are by the month so I'm obviously still getting used to it

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ryoung81 said:   Agreed, that is ridiculously cheap, especially for infant daycare. I think I paid $600 when I lived in a low cost of living area, and around $1100 in a higher cost of living area...

Sorry to hear about the complications, best of luck.

You should be able to change your benefits anytime there is a qualified change reason (i.e. having a child). Typically you add the child to your insurance after they are born, and insurance/hospital coordinate the billing.


Sorry if I didn't make it clear, so I'll try to map out my example below:

January 1: Baby is born. This means I have until February 1 to change my benefits.
January 8: I put in my life event at work and change my benefits

So between January 8 and the February deadline, would it be possible to change my benefits again since its within the 31 day cycle? Say, on January 22. Perhaps we were rethinking the life insurance policy and instead of opting out we decided to opt in.

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You do the dependent care flex if you are going to pay for care. If not, MIL helps out.

Some people don't like the reimbursement process, it's kind of lame.

I have to take pics of receipts for 6 months and I'm done. Easy enough.

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i pay 2200 a month for infant day care =( and thats not even the top day care here

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If you pay MIL from the dependant care account....it'll be viewed as her being your employee. Which means FICA/FUTA taxes that you must pay.

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i wouldn't worry about flex spend for day care, you can deduct it all from your taxes, assuming it is done legally/properly. you may also have to jump through reimbursement hoops, where you end up double-paying (one via payroll deduction, then you pay the provider, and you are reimbursed later).

the medical flex may be a better option (if possible), especially if you know you're going to be spending for NICU. normally medical expenses are not deductible from income on taxes unless they exceed a certain threshold, but you can allocate up to 2500 to flex spend for medical and it's tax free without any threshold to meet.

the main danger with flex spending is that if you don't use it, you lose it, but it sounds like you'll almost certainly use it all.

best of luck with the new addition, i hope all goes well!

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rascott said:   If you pay MIL from the dependant care account....it'll be viewed as her being your employee. Which means FICA/FUTA taxes that you must pay.
 Whether MIL will be viewed as an employee has nothing to do with using a dependent care account.

All you need to do to get reimbursed is fill-in relevant details about care provider. Your program administrator should have forms for this: usually a different form for a a "regular" day care setting and one for care provided by an individual. As long as you have all the details asked in the form (name, address, dates/hours care provided etc.), you will get reimbursed subject to following the usual rules. I am not sure but they may ask for SS/Tad ID of care provider. Of course, MIL will have to claim that as income on her returns. If she is considered an independent contractor, she will have to pay self-employment tax on it.

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Tresh said:   i wouldn't worry about flex spend for day care, you can deduct it all from your taxes, assuming it is done legally/properly. you may also have to jump through reimbursement hoops, where you end up double-paying (one via payroll deduction, then you pay the provider, and you are reimbursed later).
 

  Payroll deduction is pre-FICA (no SS/medicare tax on the amount). Taking a deduction on the tax return will mean you still have to pay SS/medicare. Something to consider.

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Tresh said:   i wouldn't worry about flex spend for day care, you can deduct it all from your taxes, assuming it is done legally/properly. you may also have to jump through reimbursement hoops, where you end up double-paying (one via payroll deduction, then you pay the provider, and you are reimbursed later).

the medical flex may be a better option (if possible), especially if you know you're going to be spending for NICU. normally medical expenses are not deductible from income on taxes unless they exceed a certain threshold, but you can allocate up to 2500 to flex spend for medical and it's tax free without any threshold to meet.

the main danger with flex spending is that if you don't use it, you lose it, but it sounds like you'll almost certainly use it all.

best of luck with the new addition, i hope all goes well!

  
Went with the HDHP for this very reason, thus I am maxing out an HSA. 

Looks like we will get the max OOP with EASE.... both for a personal surgery I wanted to get out of the way this year, as well as an expensive medication I have to take... This basically means going into the NICU after my wife's hospital bill our Family Max OOP will already be done and done. So no worries there.

Thank you the luck... we're going to need it, that's for sure. At the moment were just trying to map everything out of when we will return to work, when we will see the baby at the NICU over the next 3 months. Fun stuff for sure

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fwuser12 said:   rascott said:   If you pay MIL from the dependant care account....it'll be viewed as her being your employee. Which means FICA/FUTA taxes that you must pay.
 Whether MIL will be viewed as an employee has nothing to do with using a dependent care account.

All you need to do to get reimbursed is fill-in relevant details about care provider. Your program administrator should have forms for this: usually a different form for a a "regular" day care setting and one for care provided by an individual. As long as you have all the details asked in the form (name, address, dates/hours care provided etc.), you will get reimbursed subject to following the usual rules. I am not sure but they may ask for SS/Tad ID of care provider. Of course, MIL will have to claim that as income on her returns. If she is considered an independent contractor, she will have to pay self-employment tax on it.



You can't "hire" someone as a household employee as an independent contractor. The IRS is crystal clear on that. The MIL would be considered your employee and FICA taxes would be required paid.

The dependant care amount will show up right on your W2...and when you do your taxes you'll have to give the MIL's SSN on your return as the child care provider.

rated:
Tresh said:   i wouldn't worry about flex spend for day care, you can deduct it all from your taxes, assuming it is done legally/properly. you may also have to jump through reimbursement hoops, where you end up double-paying (one via payroll deduction, then you pay the provider, and you are reimbursed later).

the medical flex may be a better option (if possible), especially if you know you're going to be spending for NICU. normally medical expenses are not deductible from income on taxes unless they exceed a certain threshold, but you can allocate up to 2500 to flex spend for medical and it's tax free without any threshold to meet.

the main danger with flex spending is that if you don't use it, you lose it, but it sounds like you'll almost certainly use it all.

best of luck with the new addition, i hope all goes well!


That's not accurate at all. The best option is totally dependant upon the OPs income level.

Higher incomes will come out better using the flex accounts. Lower incomes better using the child care tax credit.

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rascott said:   
Tresh said:   i wouldn't worry about flex spend for day care, you can deduct it all from your taxes, assuming it is done legally/properly. you may also have to jump through reimbursement hoops, where you end up double-paying (one via payroll deduction, then you pay the provider, and you are reimbursed later).

the medical flex may be a better option (if possible), especially if you know you're going to be spending for NICU. normally medical expenses are not deductible from income on taxes unless they exceed a certain threshold, but you can allocate up to 2500 to flex spend for medical and it's tax free without any threshold to meet.

the main danger with flex spending is that if you don't use it, you lose it, but it sounds like you'll almost certainly use it all.

best of luck with the new addition, i hope all goes well!


That's not accurate at all. The best option is totally dependant upon the OPs income level.

Higher incomes will come out better using the flex accounts. Lower incomes better using the child care tax credit.

  
Income prior to tax advantages (401k, which we match 2x) is approx 160k. There are other deductions such as medical/dental insurance.

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rascott said:   If you pay MIL from the dependant care account....it'll be viewed as her being your employee. Which means FICA/FUTA taxes that you must pay.
  
If that's true, I guess that is fine. My point is, is it still worth it instead of putting $0 in dependent FSA coverage? 

At this point we have a baby that came out in April. Mom's disability coverage will be gone within 12 weeks (~End of June). After that, my 16 weeks of paternity leave can takeover... which can last until approx. Mid October. Perhaps we can toss in some vacation time inbetween there and by November we're going to exhaust all of our vacation and leave time in all likelihood. So the simple question remains: Should I put some money into dependent FSA coverage knowing our time will be exhausted and we will need to return to work around November?

rated:
justignoredem said:   
rascott said:   
Tresh said:   i wouldn't worry about flex spend for day care, you can deduct it all from your taxes, assuming it is done legally/properly. you may also have to jump through reimbursement hoops, where you end up double-paying (one via payroll deduction, then you pay the provider, and you are reimbursed later).

the medical flex may be a better option (if possible), especially if you know you're going to be spending for NICU. normally medical expenses are not deductible from income on taxes unless they exceed a certain threshold, but you can allocate up to 2500 to flex spend for medical and it's tax free without any threshold to meet.

the main danger with flex spending is that if you don't use it, you lose it, but it sounds like you'll almost certainly use it all.

best of luck with the new addition, i hope all goes well!


That's not accurate at all. The best option is totally dependant upon the OPs income level.

Higher incomes will come out better using the flex accounts. Lower incomes better using the child care tax credit.

  
Income prior to tax advantages (401k, which we match 2x) is approx 160k. There are other deductions such as medical/dental insurance.

  I'm pretty sure the tax credit phases out well below that level but you should look up the tax form to make sure.

rated:
justignoredem said:   rascott said:   
Tresh said:   i wouldn't worry about flex spend for day care, you can deduct it all from your taxes, assuming it is done legally/properly. you may also have to jump through reimbursement hoops, where you end up double-paying (one via payroll deduction, then you pay the provider, and you are reimbursed later).

the medical flex may be a better option (if possible), especially if you know you're going to be spending for NICU. normally medical expenses are not deductible from income on taxes unless they exceed a certain threshold, but you can allocate up to 2500 to flex spend for medical and it's tax free without any threshold to meet.

the main danger with flex spending is that if you don't use it, you lose it, but it sounds like you'll almost certainly use it all.

best of luck with the new addition, i hope all goes well!


That's not accurate at all. The best option is totally dependant upon the OPs income level.

Higher incomes will come out better using the flex accounts. Lower incomes better using the child care tax credit.

  
Income prior to tax advantages (401k, which we match 2x) is approx 160k. There are other deductions such as medical/dental insurance.


The flex account is the way to go at your income. You can do $5k/yr into that.

rated:
justignoredem said:   rascott said:   If you pay MIL from the dependant care account....it'll be viewed as her being your employee. Which means FICA/FUTA taxes that you must pay.
  
If that's true, I guess that is fine. My point is, is it still worth it instead of putting $0 in dependent FSA coverage? 

At this point we have a baby that came out in April. Mom's disability coverage will be gone within 12 weeks (~End of June). After that, my 16 weeks of paternity leave can takeover... which can last until approx. Mid October. Perhaps we can toss in some vacation time inbetween there and by November we're going to exhaust all of our vacation and leave time in all likelihood. So the simple question remains: Should I put some money into dependent FSA coverage knowing our time will be exhausted and we will need to return to work around November?


Put in whatever you are sure you will use in dependant care costs prior to Dec 31. But it's a use it or lose it....so definitely don't overfund it.

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If you enroll in the dependent care FSA, please send in the bills/forms regularly (usually once as month when you get a bill from provider) to get reimbursed. Do not wait till the submission deadline and end up like this guy

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