Hello!
I'm hoping someone with some expertise in this can help me out, since google has given me general information but not the specific answers I'm seeking.
Spouse received an email from HR stating "We have run the discrimination test for the 2017-18 plan year which is based on July 2017 elections and 2016 earnings. For the Dependent Care portion, we do not pass the test. To correct this situation, we must reduce the dependent care election of all HCEs by approximately 49% (remember that the plan year runs from July-June, containing 26 pays). To accomplish this we will be stopping payroll deductions after the 13th pay (pay date December 28th 2017). Example: An employee that had elected 5000.00 for the dependent spending account will now only be eligible for 2,550.00 for the year."
1) I had previously understood/thought that the discrimination testing was done in advance of open enrollment, and any caps would be made clear in advance of OE. Is this mid-year review common/legit? I'm interested in both others' lived experiences as well as the wisdom of anyone well versed in the law here.
2) Because the plan year covers the fiscal year (July-June), but we now technically have had all of our deductions made in 2017, does this effect when we can spend the money/which tax year we can claim it under?
Thanks!
