The Plan Document is the Rule Book
A recent IRS Information Letter provides a good reminder of the importance of having a plan document and following it scrupulously.
The facts in this Information Letter particularly relate to a participant of a dependent care assistance plan (DCAP) who sought a mid-year election change due to “disrupted or unforeseeable child care environment”. The request was denied since it did not occur during the plan’s open enrollment period.
As background, benefit elections in DCAPs and cafeteria plans, in general, cannot be revoked or changed during the course of the plan year, except as specifically provided by the plan. As a general rule, a cafeteria plan election is binding for the entire 12-month plan year. Mid-year election changes due to a status change or change in cost or coverage are permitted, but only to the extent that the plan document so provides. In this particular instance, the plan did not provide for the mid-year election change, and thus, the individual’s request was denied.
In summary, assuming a plan is written within the parameters of the law, it is the plan document that governs a particular circumstance.
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