Well this "memo" was written by the IRS. I think the huge gaping hole in this system is that the participant is required to keep the documentation. That is just a hilarious assumption.
You should be looking deeper into whether or not the plan may refund amounts withheld for childcare rather than looking into how to refund. This is a difficult case to make for a refund. Based on the very few facts provided, I would not refund amounts withheld or discontinue the withholding. More facts might persuade me otherwise. The IRS informally has said that changing or reversing an election is permissible, but the bar is very high.
Our decision so far has been not to take advantage of this. I'm sure the IRS in 5 years will come to the realization that the fox cannot be trusted to guard the henhouse.
i would view as an employer "corrective contribution" because they didn't withhold the proper amount from the ipads when they were given. no good deed goes unpunished right? lesson: change comp definition to W-2 excluding non-cash fringe benefits.