IRS Information Letter Addresses DCAP Submission Periods

The IRS has released an information letter addressing the claim submission deadline under a DCAP. The letter responds to an inquiry from a DCAP participant who made pre-tax salary reduction contributions of $5,000 in 2018 and incurred $5,000 of dependent care expenses that year. However, the plan administrator denied her claim for reimbursement of the expenses because it was not timely submitted. The participant asked the IRS if a hardship exception for late submission of claims is provided under the Code or IRS regulations.

The letter explains that the Code and IRS regulations do not specify deadlines for submitting DCAP claims. Plans establish these deadlines. Plans are also permitted to include a run-out period after the end of the plan year during which participants can submit claims for expenses incurred in the prior year. The letter also states that plan sponsors have the sole discretion to determine the time for submitting claims after the end of the plan year, and that the timeframe should be set forth in the plan document. The IRS does not have the authority, based on hardship or other reasons, to change the plan sponsor’s deadline for submitting claims.

EBIA Comment: This IRS information letter does not break new ground or include any surprises. But like other recent IRS information letters (see, for example, our Checkpoint article), it may be helpful to those involved with day-to-day cafeteria plan administration, who are sometimes asked to explain the reasons for plan operating rules and decisions. For more information, see EBIA’s Cafeteria Plans manual at Sections XVI.B (“Grace Periods and the Use-or-Lose Rule”), XXIII.E (“What Internal Revenue Code Requirements Apply to DCAPs?”), XXIV.B (“Checklist for Reimbursing an Expense Under a DCAP”), and XXV.E (“DCAP Forfeitures Under the Use-or-Lose Rule”).

Contributing Editors: EBIA Staff.