Comments Concerning Cafeteria Plan Regulations
Under Internal Revenue Code Section 125 III. Comments E. Comments on the Final 2000 Regulations and previously issued cafeteria plan regulations - Kindergarten Expenses under a Dependent Care FSA
Cafeteria plans which cover dependent care expenses have historically covered the tuition paid for kindergarten care. The basis for this position has been Treas. Reg. §1.44A-1 (c) (3) (i), which provides the definition of “care of qualifying individual” for purposes of Section 21 (the child care credit). That regulation does not clearly address the tuition cost associated with kindergarten. It clearly includes (as a qualifying expense) the tuition for nursery school, and it clearly excludes the tuition for first grade and above. However, the manner in which the regulation is worded suggests that tuition for kindergarten is included. As a result, that is the manner in which cafeteria plans have been administered. However, earlier this year the Service informally announced that kindergarten expenses would not be considered as permissible for purposes of the child care credit. This occurred through an example contained in Publication 503 (the example has since been withdrawn in the subsequent version of Pub. 503), and an information letter (INFO 2000-0246 dated 9/7/2000). If administrators must now begin administering cafeteria plans differently, and employers must amend their cafeteria plan documents, and participants should anticipate a change in the costs reimbursed through their cafeteria plan, such a change should be enacted through the rulemaking process (a proposed amendment to Treas. Reg. §1.44A-1 (c) (3) (i)) rather than informally.
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