Need more details. Your employer should have some written explanation of how the plan works. Does your husband contribute on an after tax or pre tax basis? Does the 1099-Misc include the total amount distributed from the fund or just the taxable amount (the earnings and or employer contribution). Normally, tax free scholarships should not be reported on a 1099-Misc; but it's a mistake that frequently happens.
But to simplify things, anything on a 1099-Misc must be reported. For how to handle, see these previous posts:
https://ttlc.intuit.com/community/taxes/discussion/1099-misc-received-for-eligible-scholarship/01/56... https://ttlc.intuit.com/community/taxes/discussion/1099-misc-for-a-scholarship/01/1315466#M475476
