Dependent Care and Support Order

[Guest Red]

A former client of mine has called me with an oddball question: one of his employees has his wages garnished to cover his child support. My client tells me that his new cafeteria plan TPA had advised that this can be considered as a DCAP expense and paid by the plan. They want to take the amount of the garnishment out pre-tax, and pay the support via the 125 account.

I've been out of the 125 world for a year or two, but I certainly don't remember anything like this in the regs. If I remember correctly, the employee can't even claim DCAP expenses for a child for whom he is not the custodian. I can think of three possibilities: 1). I'm getting senile faster than expected; 2). the regs have changed while I wasn't looking; or 3). my client is getting bad advice. What do you think?

[JanetM]

Your client is getting bad advice. Can't cite the reg, but the regs haven't changed at all. You can't pay child support pretax via 125.

[QDROphile]

The advice is so bad that if it is in fact intended by the TPA to be advice about what to do, then the TPA should be fired. However, I suspect that someone is misunderstanding something in the communications.

[Guest b2kates]

if it were a qualified medical child support order, then it could be paid out of the 125 plan.

[QDROphile]

b2kates:

Please explain your answer. A cafeteria plan does not pay anything to anybody except an insurance company or another plan. If a QMCSO required the employee to cover the child under the health plan, then the premium for the child coverage could be paid through the cafeteria plan. If the divorce order made the employee responsible for childcare and otherwise met the requirements to allow the childcare to qualify (e.g. the employee would have to have custody so the childcare would be necessary to allow the employee to work), then the employee could use the childcare spending account to cover qualifying childcare expenses and the contributions to the childcare spending account could come through the cafetria plan. Same for the healthcare FSA. But only qualifying expenses (health or childcare) could be covered and the payments would be from a component plan, not the cafeteria plan.

[Guest Red]

Thanks, all. QDROphile, I think you're right: I'm not sure my client is telling his TPA clearly enough what the issue is. Again, my thanks for the swift and thoughtful replies.