High Comped Dep Care Stopped

[Guest BenefitsAnnie]

Hi,

When a mid-year testing of the Dep Care FSA Plan demonstrated that the Plan was failing the 55% average benefits test, we stopped the contributions of the highly comped to the Plan. The non-highly comped contributions continued, of course. A new employee want to join the Plan. Her total comp for the remainder of 2013 will put her under the IRS highly comped threshold. However, in 2014, she will easily be considered highly comped. Is it ok to allow her into the Plan based on her 2013 projected earnings?

[leevena]

You stopped their contributions? Isn't this a problem for the employees becasue it was not a permitted change?

[Guest BenefitsAnnie]

Yes, you may reduce or stop the contributions of the highly comped in order to pass non-discrimination testing -- provided your plan document gives you this option. Which ours does.

[Lou S.]

Assuming she is now eligible for the plan and an NHCE which as a new employee she would be unless she has more than 5% ownership in 2013 directly or through attribution. If she is new, she didn't make over the comp limit in 2012.

[leevena]

Yes, you may reduce or stop the contributions of the highly comped in order to pass non-discrimination testing -- provided your plan document gives you this option. Which ours does.

thanks, just learned something new.