The challenge of balancing our work lives and home lives may not have ever been as pronounced as it is living with COVID-19. From trying to manage conference calls when children are at home to figuring out what summer enrichment activities are available and affordable - parents might be feeling stretched thin.
While many people are familiar with the core benefits available at their workplace that they use most often, a lot of people are unaware of how benefits like their dependent care FSA can be leveraged - like that it can be applied to childcare, eldercare or what the stipulations are.
With many adults still working from home and in need of child care assistance, this article serves as a resource for people who may not know that they can use dependent care FSA for various childcare and summer class options.
Table of Content
- What is dependent care FSA?
- What expenses are eligible for dependent care FSAs?
- How do you get reimbursed for eligible dependent care?
- How do you enroll in dependent care FSAs?
- How do you look for care providers that are eligible for use with dependent care FSAs?
- Why should you encourage your employees to enroll in dependent care FSAs?
- How can HR teams manage dependent care FSA programs?
What is dependent care FSA?
An FSA is a flexible spending account and a dependent care FSA is one that is specifically for caregiving expenses. Employees can decide how much money they want to contribute to this account annually, and then the amount is deducted tax-free throughout the year directly from the employee's paycheck.
The money contributed is available for use at any point in the year as long as it's for the purpose of paying for care of a qualifying dependent while the adult is working or participating in employment-related activities (such as job searching). Qualified expenses must be:
Expenses related to employment in order to care for a qualifying dependent
Incurred during the plan year
A qualifying dependent is not limited to a child. Any of the below examples can be considered a qualifying dependent:
A qualifying child or relative under the age of 13
A child or relative 13 years or older who cannot care for themselves and shares an address with the employee for more than 50% of the year
A spouse who cannot care for themselves, has a physical or mental disability, and shares an address with the employee for more than 50% of the year
Given that, although family members can be eligible caregivers in some circumstances, there are people who do not qualify as givers of dependent care under this program, such as:
Any person who the employee or spouse can claim as a dependent
Any person who was the spouse of the employee during the year
Any child of the employee under the age of 19
The parent of the child who is being provided care
What expenses are eligible for dependent care FSAs?
Day Camp or Summer Camp (including special activity camps like sports camps, technology camps, or art camps)
Home care, including nannies and au pairs
Care at a facility, including daycares
Care before school and/or after school
Backup childcare or sick childcare expenses
Eldercare or senior care at the employee's home or a qualified facility
Babysitting for work-related events
There are also a number of expenses that do not qualify, such as:
Camps that occur during non-work hours
Camps that are for tutoring or are primarily educational (lessons, classes, etc.)
Babysitting for non-work related needs
Online or virtual camps
Activity fees or material fees
How do you get reimbursed for eligible dependent care?
This will depend on the benefits system and claims administration process at your particular workplace. However, in general, after making a payment for qualified care, employees are typically required to submit a receipt into their benefits system for reimbursement. Some employees who use the benefit regularly find great success in timing their payments so that their claim reimbursement from a previous week can now be used to pay a subsequent week, etc.
How do you enroll in dependent care FSAs?
Similar to other benefits, employees can make a change to their Dependent Care FSA elections annually during open enrollment, or mid-year if there's a permitted election event. Fortunately, adding a new care provider is a permitted election event - allowing employees to either add an FSA or increase their election contributions.
How do you look for care providers that are eligible for use with dependent care FSAs?
The dependent care FSA system is expense-based, not provider-based. Meaning, as long as the expense is valid and eligible, then usage is applicable. This can include nannies and au pairs that are employed to work privately in your home.
Why should you encourage your employees to enroll in dependent care FSAs?
Because any amount contributed to their FSA through paycheck deduction is exempt from taxes, this benefit can save employees a lot of money when they use the plan for a qualified emergency or expected care expenses. It can also provide relief of mind for employees to know that the money is available and will be quickly reimbursed to them.
How can HR teams manage dependent care FSA programs?
GoCo’s 100% digital online benefits enrollment in the platform makes it extremely easy to enroll in dependent care FSA during open enrollment. You can view and compare different plans at-a-glance, and see exactly how much you would need to pay for different benefits. Once you’re enrolled, you always have easy access to your plan information, and eligibility, with a single sign-on. You also have access to Certified Benefits Advisors who are there to help answer any questions you have regarding plans, costs, or any other details.