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ARTICLE · 13 AUGUST 2026

Worth The Wait: IRS Proposes New Nondiscrimination Rules For Dependent Care Assistance Programs

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The Treasury Department and IRS have released proposed regulations addressing nondiscrimination rules for dependent care assistance programs under Code section 129, marking the first guidance on these rules in over 45 years. These regulations provide detailed frameworks for the four required nondiscrimination tests and offer practical correction mechanisms for testing failures.

United StatesEmployment and HR
Kathryn Bjornstad Amin
Kathryn Bjornstad Amin
David Block
David Block
Christine Keller
Christine Keller
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On August 10, 2026, the Treasury Department and the IRS (together, the IRS) released proposed regulations addressing the long-awaited nondiscrimination rules that apply to dependent care assistance programs (“DCAPs”) under Code section 129. This is the first time the IRS has issued guidance on these rules, which were first effective over 45 years ago! The regulations are consistent with a common-sense approach that some employers have been applying in the absence of specific guidance, and welcome news. The regulations should also provide comfort to employers who have been reluctant to increase DCAP limits to $7,500 due to concerns about satisfying nondiscrimination rules. The proposed regulations closely track the companion nondiscrimination rules for Trump account contribution programs (see our alert here), but they retain several features unique to DCAPs.

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