We recently encountered a situation with an employee who failed the non-discrimination testing for the Dependent Care FSA. As a result, their annual limit was reduced, and payroll stopped deductions once they reached the revised limit.
Later, the employee experienced a qualifying life event and was able to re-enroll in the Dependent Care FSA. However, after re-enrollment, their total contributions exceeded the revised annual limit due to the new elections.
We’re looking for best practices or system configurations to prevent this from happening in the future. Specifically:
- How can we ensure that any new elections account for the previously reduced limit?
- Are there any automated checks that can be set up to prevent overcontributions?
- Has anyone successfully implemented a workaround or policy to mitigate this risk?
Any insights or recommendations would be greatly appreciated!
