Dependent Childcare Account (DCA) Benefit Details
Why should I participate?
Since contributions to the account are deducted from your paycheck before income taxes are assessed, your taxable income is reduced. Participants enjoy a 30% average tax savings on the total amount they contribute to the account.
How much can I contribute?
The IRS limits annual contributions to $5,000 on income tax returns for single or married filing jointly, and $2,500 for married filing separately.
How do I contribute money to my DCA?
Once you make your annual election during open enrollment, your employer will deduct this amount from your paycheck before taxes are assessed in equal amounts throughout the year.
Who qualifies as a dependent?
You can use your DCA to pay for care for children under age 13 that you claim as dependents, as well as adults or other relatives that are incapable of caring for themselves (if you provide more than 50% of their support).
What type of care is eligible?
Eligible expenses must be for the purpose of allowing you to work or look for work. Services may be provided at a child or adult care center, nursery, preschool, after-school, summer day camp, or a nanny in your home.
What type of care is not eligible?
Care expenses that are not eligible to be paid with DCA funds include care for a child over age 13, overnight camp, babysitting that is not work related, school fees for kindergarten and higher grades, and long-term care services.
Do I have access to my entire DCA election amount at the beginning of the year?
No, you will only have access to DCA funds that have already been deducted from your paycheck.
Are there any rules about who can care for my dependents?
Yes. You can not use funds to pay for care provided by a spouse, a person you list as a dependent for income tax purposes, or one of your children under the age of 19.
How do I use the funds in my account?
If you have a benefits debit card and your care provider accepts credit cards, you may pay directly from your account. Otherwise, pay out-of-pocket and then file a reimbursement claim with your expense documentation.
What happens if I don’t spend all of my DCA funds by the end of the plan year?
It is essential to estimate conservatively during elections. Any unused funds at the end of the plan year are forfeited, also called the use-it-or-lose-it rule.
Can I change my election amount mid-year?
Typically, you cannot change your contribution midyear. However, if you experience a qualifying event, such as the birth of a new child, or if your child care provider significantly increases their rates, you may be eligible to adjust your contribution.
What happens to my account if my employment is terminated?
Participation in the plan is also terminated. This means that only expenses that were incurred prior to your termination date are eligible for reimbursement.