A recent IRS Information Letter answers a question about run-out periods in dependent care assistance programs. This Information Letter does not break new ground, but it does articulate an important point that may be helpful to employers as they get questions from plan participants.
A dependent care assistance plan (DCAP) can, by its terms, establish a run-out period. A run-out period is a designated period of time following the close of the plan year, during which time, participants can submit requests for reimbursement of claims incurred during the plan year. It is the terms of the plan that set the run-out period; the law itself does not require these types of plans to include a run-out period. It is the responsibility of the plan sponsor to follow the terms of its written plan, as well as communicate the timeframes for submitting claims to participants.
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