Exclusion of Dependent Care Benefits

[Guest Bud]

My company has two child care programs. One program is a typical dependent care assistance plan where employees contribute a portion of their salaries to the plan and get reimbursed from the plan after submitting a claim. The other program is a back-up program for occasions when an employee's regular child care provider is unavailable. The back-up program is free to employees and is paid for by my Company.

Could someone confirm or correct my opinion that both benefits have to be combined for the exclusion under Section 129. In other words, combined amounts under $5,000 are excludable and amounts above $5,000 are taxable income. If an employee uses the back-up program, it reduces the amount that can be claimed tax free from the dependent care assistance program.