Refund Dependent Care FSA Contributions

[Jessi]

I have an employee that elected Dependent Care FSA for 2017, has had amounts withheld and has processed claims with our provider but just realized that as part of his divorce decree he and his ex switch year to year who covers and claims their child so he is not eligible for the DC FSA. 

 

How do we go about refunding him for the amounts withheld and him repaying the amounts he was reimbursed for invalid claims?

[QDROphile]

You should be looking deeper into whether or not the plan may refund amounts withheld for childcare rather than looking into how to refund.  This is a difficult case to make for a refund. Based on the very few facts provided, I would not refund amounts withheld or discontinue the withholding.  More facts might persuade me otherwise.  The IRS informally has said that changing or reversing an election is permissible, but the bar is very high.

[hr for me]

have to agree my first thought was what QDROphile posted.  It may be that the employee and his ex-spouse are going to have to work this out. Is his spouse also covering the child under an FSA  or is she just responsible for the child care costs this year?

   A costly mistake no doubt.