There are important things to know with a Dependent Care Flexible Spending Account (DCFSA).
Qualified Events & Enrollment
Additional life situations considered as Changes in Status or Qualifying events include: A change in cost or coverage related to a child care provider fee or a change in the number of hours of care needed. A change in marital status, such as marriage, divorce, or death of your spouse. A change in the number of your dependents, such as birth or adoption of a child, or death of a dependent. A change in employment status for you, your spouse, or dependent that affects eligibility. An event that causes your dependent to satisfy or cease to satisfy eligibility requirements.
Generally, if both parents are married, working and filing taxes jointly, the maximum contribution is $5,000 annually. If you are single or married and filing separately, the limit is $2,500 annually.
Every situation is unique, so the maximum amount may be less if the employee’s Earned Income or spouse’s Earned Income is less than $5,000 per year. To learn more about maximum contributions or earned income for those individuals earning less than $5,000 per year, see page 4 of IRS Publication 503.
Who are Qualified Dependents?
- A “Qualifying Person” is defined as one of the following:
- A dependent who was under age 13 when the care was provided and for whom an exemption can be claimed.
- A spouse who was physically or mentally not able to care for himself or herself and lived with you for more than half the year.
- A dependent who was physically or mentally not able to care for himself or herself and for whom an exemption can be claimed and lived with you for more than half the year.
Important Differences between Dependent Care and Healthcare FSAs
There is no carryover option with a Dependent Care FSA Account so that means that at the end of the benefit plan year, all money must be claimed by the employee or the employer will assume the funds.
Unlike a Healthcare Flexible Spending Account where the annual election is available on the first day of a plan year, a Dependent Care FSA account is a money in/money out. Meaning, money is only available as you pay into the account.
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