June 13, 2006 |
Posted By Diane Pfadenhauer |
What's Permissible Under Your Dependent Care Reimbursement Plan
Janell Grenier over at Benefitsblog has a link to the IRS' proposed regulations for Dependent Care Reimbursement Plans. Such plans are usually part of an employer's Section 125 Plan allowing employees to contribute money one a pre-tax for child care. So what is permissible? She notes:
The proposed regulations clarify that when it comes to school-related expenses, nursery school and preschool can qualify as employment-related expenses as well as before- and after-school care. The IRS goes on to note that a day camp will qualify even if the camp is a "specialty" camp, such as a camp devoted to just soccer or computer:This is timely guidance for plan administrators. Often, there is a great deal of confusion on anything relating to the IRS!
The IRS has received many inquiries about whether the cost of a day camp that specializes in a particular activity, such as soccer or computers, may be an employment-related expense. To provide certainty for taxpayers and enhance administrability, the proposed regulations provide that the full amount paid for a day camp or similar program may be for the care of a qualifying individual although the camp specializes in a particular activity.
However, what about kindergarten? The IRS says:
The proposed regulations clarify the existing rule that expenses for programs at the level of kindergarten and above, however, are primarily for education and, therefore, are not employment-related expenses.
