Discriminatory Dependent Care Reimbursement Account

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If a Dependent care Reimbursement Account Plan is discriminatory (fails the 55% utliziation test) the amounts received as reimbursements under the plan are taxable to HCE's.

If, for example, the plan is discriminatory for the 2001 plan year, and the HCE has expenses that are reimbursed during the run off period in 2002, are those amounts taxed in 2001 or 2002?

It seems to me that the impact of failing the test is that 129 does not apply to the HCE's. Therefore reimbursements for dependent care are taxable when paid. But can the employer use the same rule that is available for reporting dependent care expenses on Form W-2 and treat the estimated reimbursements as taxable income in 2001 (if the employer is comfortable that the employee will in fact have the expenses)?

Thanks-

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