DCAP Employer Contributions

[Guest Sterling]

I'm wondering if anyone can offer guidance on the compliance of the following situation:

An employer group sponsors a DCAP program. They wish to make contributions up to $50 per month to individuals signed up in the plan, with children under the age of three. They do not want to make contributions to those individuals with children older than three years old.

To me, it doesn't seem like this will fly, but I can't find anything in the regs one way or another. Any guidance is appreciated.

Thanks!

[Guest gchase3]

I had the exact same question (and similarly, no answer). Any thoughts?

Employer contributions for a health care FSA would be excluded under 106? Would employer contributions to a DCAP (that are not cash and deferred elections) even be excludable?

Would a separate eligibility test be necessary for those employees eligible for the employer contribution to the DCAP?

Thanks in advance!

[SLuskin]

We have had employer matches in DCAP but never determined by age of child. Also, of course, employer plus employee contribution could not exceed $5000 for plan or calendar year. I think if you did the dcap testing and it passed that this might be workable.

[jpod]

First, there shouldn't be any "contributions" (contributions TO what?). I think what you mean is that the employer will provide reimbursements of up to $50 per month for employees who qualify. Second, there is nothing to prevent the type of eligibility criteria you describe. If the reimbursments are made pursuant to what is otherwise a good Section 129 DCAP, they're tax-free.

[Guest gchase3]

Thanks to everyone for responding, this was very helpful!