What is the Adoption Advantage Account?
Eligible employees can now enroll in a flexible spending account for expenses related to the adoption of an eligible child. Pre-tax payroll deductions contributed to the Adoption Advantage Account can help pay for an adoption that meets the IRS's definition of a qualified adoption. Although you won’t save on social security taxes, you can save on federal and state taxes (where applicable) by having up to $14,080 withheld from your paycheck on a pre-tax basis.
Who is Eligible to Enroll?
Employees of Executive Branch state agencies, the State University of New York, or Roswell Park Cancer Institute who are designated M/C or represented by:
What You Need to Know Before Enrolling
- Qualified adoption expenses are reasonable and necessary expenses directly related to, and for the principal purpose of, the legal adoption of an eligible child including the expenses listed above.
- An eligible child must be under the age of 18 or any disabled individual physically or mentally incapable of self-care and must not be a stepchild.
- You can enroll or stop deductions within 60 days of starting or stopping adoption proceedings. Accounts cannot be back dated so keep in mind only expenses incurred after you enroll will be eligible for reimbursement.
- Pre-tax deductions are not refundable for any reason. You can only be reimbursed from money already contributed to your Adoption Advantage Account. If you are unable to get reimbursed, you will forfeit the money back to the plan.
- You can have up to the maximum amount of the adoption tax credit withheld from your paycheck.
- Employees are responsible for understanding the tax treatment of reimbursement under this plan and for claiming the application income exclusion by filing Form 8839 with their federal income tax return.
Qualified Adoption Expenses
Qualified adoption expenses are reasonable and necessary expenses directly related to, and for the principal purpose of, the legal adoption of an eligible child.
Qualified adoption expenses include:
- Adoption fees
- Agency fees
- Attorney fees
- Court costs
- Home study and application fees
- Medical services associated with a child with special needs
- Travel expenses (including meals and lodging) while away from home
- Re-adoption expenses relating to the adoption of a foreign child.
Qualified adoption expenses don't include expenses:
- For which you received funds under any state, local, or federal program
- That violate state or federal law
- For carrying out a surrogate parenting arrangement
- For the adoption of your spouse's child
- Reimbursed by your employer or otherwise
- Allowed as a credit or deduction under any other provision of federal income tax law.
An eligible child is:
- Any child under age 18. If the child turned 18 during the year, the child is an eligible child for the part of the year he or she was under age 18.
- Any disabled individual physically or mentally unable to take care of himself or herself.
Change in Status
You must enroll during the open enrollment period, unless you have a change in status event that occurs after the open enrollment deadline.
Once enrolled in the adoption FSA, you may not change your mind. Your pre-tax deductions will continue throughout the calendar year. However, there are certain circumstances where a change may be permitted. Here are some examples of eligible changes in status (CIS) events:
- Beginning or end of adoption proceedings
- Beginning of or return from leave of absence (employee or spouse)
If you have a change in status, you must submit your application online or by phone within 60 days, inclusive, of the qualifying event, but as promptly as possible to prevent unwanted, non-refundable deductions. Your application to start, change, or terminate your account becomes effective once the date of the change in status event has elapsed or the date your application is received, whichever is later. Any change in your contributions must be consistent with the change in status. No additional documentation or verification of the eligible event is required. It is your responsibility to keep legal documentation of the changes in your personal records in case the IRS audits you.
If you are starting an account after the plan year has begun with an eligible change in status event, your expenses will be eligible for reimbursement from the date your application is received or the date of your change in status, whichever is later, through December 31.
Change in status applications will be accepted during the plan year until November 1, 2020 for change in status events that occur on or before November 1, 2020. Applications received after that date cannot be processed in time for the last pay period of the year.
What happens if I leave the payroll during the plan year?
If you leave the payroll due to termination of employment, leave without pay (including leave under the Family and Medical Leave Act), or any other reason, and stop contributing to your account, your eligibility in the adoption FSA will be terminated. You will still be able to submit claims for expenses that occur on or before your last paycheck deduction, but any adoption-related expenses that occur after your contributions stop will not be reimbursed.
What to do at Tax Time
When you receive your W-2 form, the salary reported in Box 1 will already be reduced to reflect your plan year contributions. You will also need to file Form 8839, Qualified Adoption Expenses.