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This ticks me off- HR/Flex daycare spending related

makclairmakclair member
in Working Moms

I work for a large hospital system. I have taken advantage of the flex daycare spending since i've been employed with them last May (my practice joined mid-year). I signed up again this year to take out 5K in daycare flex spending (which is the max we're allowed to take.). It is very convenient because it is on a debit card so we've just paid each week's daycare using the card.

 Well, I got a letter today stating that there was some federal law -something about the ratio of "highly compensated" vs "non highly compensated" employees and their contributions being uneven  or something. Basically because people that make less than me don't contribute to the flex spending , now i'm only allowed to contribute 2,500 per year????? This is redic. 

Have you heard of this?

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Re: This ticks me off- HR/Flex daycare spending related

  • g_belleg_belle
    usually just a lurker...but I'm in hr so maybe I can help a little- There were a ton of changes to laws regulating both daycare flex spending accounts and healthcare flex spending accounts this year.  There were national changes and some changes that may go into effect based solely on your company's plan structure.  Your best bet is to talk to your HR at work to see if they can give you a further explanation and I'd also suggest talking to whomever does your taxes to find out if there's another way you can utilize the child care tax breaks.
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  • aglennaglenn member
    Yes, it's actually an IRS regulation. The plan is deemed "discriminatory" if certain ratios of participation are not met. The plan can't have more than a certain percentage of participants in the "highly compensated" category or the benefit could lose tax free status. It's the IRS, though, not your HR Dept, that has these rules.
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  • stromtobestromtobe
    Oh no.. I run into that with my 401(k)... my  contribtuions are limited to 5%  since I am considered "highly  compensated".    We did our flex money through DH this year since I will be out on maternity leave for 3 months so next year we will need to consider.  I work in a corporate office of a retail company so we have lots of employees who don't make much and don't use the benefits so those of us who are full time and in more professional roles fall into highly comped pretty easily.
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  • Skibunny07Skibunny07

    imageaglenn:
    Yes, it's actually an IRS regulation. The plan is deemed "discriminatory" if certain ratios of participation are not met. The plan can't have more than a certain percentage of participants in the "highly compensated" category or the benefit could lose tax free status. It's the IRS, though, not your HR Dept, that has these rules.

    This is exactly what it is, they have to do the same thing with 401k as well. They basically have to audit their plan every year and compare and if the number of highly compensated employees contributing is greater then lower compensated employees then they have to limit what those higher paid employees can contribute. It sucks but they have to comply with it.  

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  • Stacyc625Stacyc625 member
    Yup (i am an accountant) thank the good ole' IRS for mucking things up even more.
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