Dependent Care Plan - Section 129

[PJ2009]

This is an easy one, but I just want a comfort level. Suppose an employee has elected to make the maximum deferral necessary to fund their dependent care assistance plan. Ideally, they will make regular payments throughout the 12-month period. However, is there a problem with funding the entire amount early in the year? There is always the possibility that the employee will not be able to use the entire amount and will have to forfeit the unspent portion. However, in my situation, that is extremely unlikely. The employee wants to pre-fund because she is going on medical leave soon. Thanks!

[Mary C]

If she is wanting to pre-fund in order to use daycare while on leave, be careful. Under the regs, reimbursements can only be made to enable the employee and/or spouse to work or attend school. Expenses incurred while she is out on a medical leave are not covered by the plan.

[leevena]

Out of curiosity, why would you want to do this? Thanks.