What Is Dependent Care FSA?
A Flexible Spending Account is a common addition to many benefits packages, but what is Dependent Care FSA? A Dependent Care Flexible Spending Account (DCFSA) is a pre-tax benefit that allows reimbursement for qualified dependent care expenses. Qualified expenses include care for a dependent child under the age of 13 and care for your spouse or adult dependent who is physically or mentally unable to care for themselves.
How it works
Plan participants specify a certain dollar amount to contribute from their paychecks per pay period to their DCFSA. The money is pre-tax, saving participants between 15%-40% for rendered services and lowering their overall tax liability. Unlike a Medical FSA, DCFSAs are a pay-as-you-go account, meaning funds are not advanced by the employer. DCFSAs also differ from traditional FSAs since election amounts can change or stop during the year if expenses change, which significantly reduces the risk of use-it-or-lose-it.
Employers can offer a BASIC Benefit Debit Card at no additional cost to make things even easier on the employee. Care can also be paid for out-of-pocket, with reimbursements made via direct deposit or check.
Why offer a Dependent Care FSA benefit?
A DCFSA is a no-brainer benefit for many employers wanting to bolster their benefits package, as employees can save well over a thousand dollars per year in dependent care costs. To illustrate, a participant electing to contribute $5,000 per year to a DCFSA could see annual savings between $1,132* and $2,383**! A Dependent Care FSA benefits employees with significant savings and gives employers an affordable way to attract high quality job candidates.
What services are eligible?
Services like after school programs and child/adult daycare are covered DCFSA expenses. The care provider may not be a minor child or dependent for income tax purposes. Expenses paid for Pre-K are eligible but kindergarten and higher is not. The full list of covered services is much larger and determined by the IRS, and participants are welcome to talk to one of BASIC’s FSA team members with questions. View the full IRS guidelines for child and dependent care expenses here.
BASIC Dependent Care FSA Administration
BASIC’s industry leading FSA Administration brings technology and service together. Each employer, regardless of size, has a dedicated Account Manager with direct dial and email access. Additionally, participants love our call center where the average hold time is only 30 seconds. Add in the BASIC Benefits app and BASIC Benefit Debit Card and you can see why thousands switch to BASIC FSA every year. Request a proposal for Dependent Care FSA Administration today!
*Assuming 15% Federal tax, 7.65% FICA Tax (Social Security and Medicare)
**Assuming 40% Federal tax, 7.65% FICA Tax (Social Security and Medicare)