Dependent Care Flexible Spending Account (Dependent FSA)
Dependent Care FSA
Like a General or Limited Purpose Health FSA, the Dependent Care FSA is an account, funded by money taken out of your paycheck (before federal taxes), to help you pay dependent day care expenses during the year.
Advantages
Money you set aside in a Dependent FSA isn’t taxed by the federal government. You can then use this money, tax free, to pay for qualified day care expenses during the year.
The amount you’ll put in a Dependent FSA over the course of the year is decided when you enroll, though the funds are taken out of your paycheck in smaller increments.
For Example
Hannah decides to enroll in a Dependent FSA. She expects to pay about $3,500 in day care costs during the year for her daughter, so she decides to contribute that same amount to her Dependent FSA.
Hannah’s contribution to her Dependent FSA is spread out over the year, across all her paychecks. Since Hannah gets paid 26 times per year (biweekly), her per-paycheck contribution to her FSA is $134.62.
At the end of March, Hannah has a day care bill of $1,500. But since she’s only contributed $807.72 into her Dependent FSA at that point, she can only access the $807.72 that she has contributed.
Requirements
The money in a Dependent FSA can only be used to pay for a dependent’s qualified day care expenses. Officially, these are any day care expenses your dependent child (or eligible adult) has that are unrelated to education or health care.
Note: Expenses for the care of a relative’s child are not eligible.
Anyone that has dependents that meet the eligibility requirement may enroll in the Dependent Care FSA.
When you sign up for a Dependent FSA, you’ll declare an amount to contribute. If your childcare provider’s rates change during the year, you’ll have 30 days to change your Dependent FSA contribution amount. Other than that, there are very few ways to change that contribution amount for the rest of year. (The exception being a special enrollment, which might allow for a change, depending on the life event.)
Unlike a General or Limited Purpose Health FSA, funds do not roll over from year to year. It’s use-it-or-lose-it. If you don’t use all your funds during the year (with a grace period until March 15th of the following year to submit claims for reimbursement), you risk losing any remaining balance. Also, unlike the other FSAs, funds in a Dependent FSA are only available after you have contributed them from your paycheck into your account.
Depositing Funds
Funds are deposited by you, pre-tax, from your paycheck. You set the total amount at the beginning of the year, when you enroll, and then that total amount is divided between your paychecks.
Contribution Limits
You may elect to contribute between $100 - $5,000 into a Dependent FSA over the course of the year. (The amount is the same for individuals and families.)
How to Pay for Qualified Expenses
- You pay the expenses yourself and get reimbursed (by submitting your receipts and a claim form to Fidelity at NetBenefits.com, or by declaring the expense directly on Fidelity’s web site NetBenefits.com).
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- General Purpose Health FSA and Limited Purpose Health FSA: These two accounts can be used to set aside money from your paycheck to cover qualified health expenses during the year.
- Special Enrollment: An opportunity to enroll in select benefits outside the normal enrollment periods, due to a qualifying life event.
Link to the Health and Dependent Care FSA Summary Plan Description (SPD)
For further details, contact Fidelity at NetBenefits.com, or 1-800-835-5095.