DCAP and FSA limits

[Guest mab]

Employer has a cafeteria plan that provides each employee the option to choose up to $10,000 in benefits under the plan. The plan has both a FSA and DCAP arrangement.

There are employees who have no dependents and thus choose up to $10k in FSA benefits through payroll deduction. Those using daycare usually split the participation between the two components- $5k to each- through payroll deduction.

Our new HR person is telling us that this is discriminatory since some employees cannot elect to receive more than $5k in the FSA. I countered that this is not true, rather they could receive up to $10k if they chose not to participate in the DCAP.

Is this discriminatory? No key employees participate in the plan.

[QDROphile]

Rather than fuss over the discrimination issue, why not go to the heart of the matter and ask why the plan has a combined FSA limit? If you find no good reason, then eliminate the source of the discrimination issue and possibly other legal issues. Since DCAPs are not subject to the uniform coverage requirement, a good reason for the combined cap escapes me.

If what you are saying is that the employer provides $10,000 of benefit credit to apply to FSAs, the $10,000 credit does not have to be changed to provide a $10,000 health FSA limit and a $5000 DCAP limit. The difference can be covered by salary reduction.

Since your arrangement is so unusual, I wonder if the FSA is reimbursing health insurance premiums.