Participating in a Dependent Care Program after open the enrollment pe

[Guest ljt064]

My spouse has been participating in a Dependent Care program for the past 2 years. Just last week, she was informed by her Employer that an evaluation of the company wide program has determined that the percentage of highly compensated employees is to high and that she is no longer eligible to participate in their program for calendar year 2000. My company offers a Dependent Care program, however, the open enrollment plan has long since closed. My question is does my Company have an option to allow me to begin participating in the program for calendar year 2000?

[Guest]

You have to ask your Company what the plan provides. The cafeteria plan regs provide for your participation as a family status change, but that doesn't mean your company's plan has to let you in.

[Joe Priselac]

ljt064

I am curious about your wife's company. How many employees are eligible to participate in the FSA plan? Secondly,is your wife highly compensated i.e. makes over $80,000 or is she a stock holder in her company? She could continue her participation even if the DCAP failed the nondiscrimination test if she was not a highly compensated employee.

[Guest ljt064]

She works a large State Authority and I'm unsure the actual number of employees who participate in the program. It’s a good news and bad news situation. She is considered “highly compensated”, therefore, she is no longer eligible to participate.

[Guest ljt064]

I found this info on the web. "Only if there is a change in status, or if there is a significant increase in premiums, or a significant reduction in the coverage provided by a third party, may the annual election be changed."

What's your interpretation of "significant reduction in the coverage provided by a third party"? Your thoughts are appreciated.

[Joe Priselac]

ljt064

The reason I asked about your wife's employer and her status is that I have seen discrimination testing done incorrectly often enough to become suspicious. Generally, the larger the employer the harder it is to fail certain tests. Assuming that they are right, in my opinion, you can't go back to your employer and legitimately ask for an exception to the the once per year enrollment rule. This is not a change in family or work status that might give you the oportunity to change your election.

[JWK]

The election changes permitted due to significant cost or coverage changes apply to health plans only, not dependent care plans.

I don't think there is anything in the section 125 regs that would allow a new election because a spouse's contributions were cut back due to a projected discrimination test failure. This is a good argument to complete the projected test before January 1, so married employees may still be able to have their spouse enroll in the spouse's employer's DCAP.

Joe: I think the 55 percent test for DCAPs is easy to fail regardless of the size of the employer, simply because there are so many more NHCEs in the denominator that the average benefit for NHCEs tends to be very small. Have you found a way to exclude NHCEs from testing, other than the <21, < 1 year of service, <$25,000 statutory exclusions?

[This message has been edited by JWK (edited 01-12-2000).]

[Guest CLKeown]

You wrote:

"Only if there is a change in status, or if there is a significant increase in premiums, or a significant reduction in the coverage provided by a third party, may the annual election be changed."

Is this directly from your company's plan documents? Each company and each plan vary. It is almost a guarantee that no two companies are exactly alike on this issue. So if this is not from your plan documents it is probably not relavent.

My interpretation of this is that the insurance company or plan administrator must be the one to stop offering the benefit or increase the cost of offering the benefit.

Thus the statement of "third party". First party = employer; Second party = employee; Third party = Insurance Co/Plan Administrator.

Carole