Reducing HCE dependent care FSA

[Miner88]

To pass the non-discimination test for our dependent care flexible spending account, we need to reduce contribution levels of HCEs from $5000 to around $3500 for this calendar year. We are in the process of hiring a new HCE - should we also limit this employee's contribution level to $3500 to be consistent? (I'm aware that the determination of who is an HCE is made based on prior year's earnings, which would be zero in this new employee's case.) If you think the contribution should be limited, does it make a difference if the employee was hired later in the year and his actual earnings would not meet the HCE definition? Your thoughts are appreciated!

[JanetM]

By definition you can not be HCE the first year you work for employer, exception is if you transfer between members of a control group. This guy is not an HCE in 2008 unless you paid him over $100,000 in 2007.