Dependent Child Care

[Guest deannieb]

Question from a client: regarding the Dependent Care Spending Account. If the spouse of and employee does not work out of the home, are they still eligible for participating in the Dep care spending account? I think if she is a full-time student or disabled they would qualify. If they aren't eligible can they stop the current contributions and get their money back that they have been contributing?

[Guest JerseyGirl]

If they aren't eligible to participate why wasn't that determined through employee education before the start of the plan year? Was there-- I'm hoping-- a change of staus that you failed to mention?

[Guest deannieb]

If they aren't eligible to participate why wasn't that determined through employee education before the start of the plan year? Was there-- I'm hoping-- a change of staus that you failed to mention?

This group was a mid year take over not certain why it was not determined at enrollment. There has been not qualiying event.

[Guest JerseyGirl]

If the wife is a full-time student for at least 5 months out of the year participation is OK, although I would think they would not need child care once school is out. I don't know of any clear guidence on the disability angle, but I would think that if the mother is too disabled to care for the child, she may need some sort of care herself.

If this is just a plain old mistake, and they never should have been in a DCAP plan to begin with, I think the proper correction would be something like this: Stop contributions immediately, refund on an after-tax basis all money contributed thus far, minus any amount that has been reimbursed in error.

Once an error of this nature has come to light, the entire plan in non-compliant until coorections have been made.

[Lisa Hand]

One note on the suggested correction. If you determine a mistake was made, to correct it, any amounts reimbursed in error would have to be refunded by the participant to the plan since they are not valid expenses, then the entire amount would have to be reversed through payroll and taxed. You can not have it both ways, correct the "mistake" and let them keep the erroneous reimbursements.