Childcare and elder care expenses can significantly strain a family’s budget. For eligible employees, a Dependent Care Assistance Program (DCAP) offers a valuable solution to ease this financial burden. But what is a Dependent Care Assistance Program exactly, and how can it benefit you? This guide will provide a comprehensive overview, breaking down the essentials of DCAP, its eligibility criteria, benefits, and how to make the most of this program.
Who is Eligible for DCAP?
The Dependent Care Assistance Program is specifically designed for employees who meet certain eligibility requirements. Generally, DCAP is offered to PEBB (Public Employees Benefits Board) benefits-eligible employees working at:
- State agencies
- Higher education institutions
- Community or technical colleges
It’s important to note that eligibility is tied to these specific employers. If you are employed by a city, county, port, tribal government, water district, or hospital, you are typically not eligible for DCAP. Regardless of the type of medical plan you are enrolled in, you can still participate in DCAP within the same year, provided you meet the employer criteria.
How Does DCAP Help You Save Money?
The primary advantage of a Dependent Care Assistance Program lies in its ability to reduce your taxable income. DCAP allows you to set aside pre-tax funds from your paycheck to cover eligible dependent care expenses. This means the money you contribute to DCAP is deducted before taxes are calculated, effectively lowering your annual taxable income.
This pre-tax benefit translates to significant savings because you reduce your liability for:
- FICA taxes (7.65%): This includes Social Security and Medicare taxes.
- Federal income tax (up to 37%): The exact percentage depends on your income bracket.
By using pre-tax dollars for essential dependent care, you are essentially getting a discount on these necessary expenses.
What Expenses are Eligible under DCAP?
DCAP covers a range of expenses that enable you (and your spouse or state-registered domestic partner, if applicable) to work, attend school full-time, or actively seek employment. Eligible expenses commonly include:
- Child Daycare: Care for children in daycare centers.
- Preschool: Educational programs for young children before formal schooling.
- Babysitting: In-home or out-of-home care for children.
- Elder Day Care: Supervised care for elderly dependents during the day.
- Registration Fees: Fees associated with enrolling dependents in eligible care programs.
Who Qualifies as a Dependent?
To be considered a qualifying dependent for DCAP purposes, the individual must meet specific criteria:
- Children age 12 or younger: They must live with you to be eligible.
- Dependents age 13 or older: They must be physically or mentally incapable of self-care and reside in your household for at least eight hours each day on a regular basis.
For a deeper understanding of the potential savings and benefits, consider listening to resources like the Fund Your Future DRS podcast episode which discusses DCAP and similar programs in detail.
Enrolling in DCAP: When and How
Enrolling in the Dependent Care Assistance Program is typically straightforward, but understanding the enrollment periods is crucial.
For employees of the University of Washington and Washington State University: Enrollment must be completed through the Workday system.
For all other eligible employees, enrollment opportunities arise:
- During Open Enrollment: This is the annual period when you can elect benefits for the upcoming plan year. This is the most common time to enroll in DCAP.
- When Initially Eligible for Benefits: If you are a new employee or newly eligible for PEBB benefits, you can enroll in DCAP at this time.
- Special Open Enrollment Events: Certain life events, such as birth, adoption, marriage, divorce, or death, may trigger a special open enrollment period, allowing you to enroll in or modify your DCAP election. However, any changes must be consistent with the qualifying event.
Important Note: DCAP enrollment does not automatically renew each year. If you wish to participate in DCAP for each plan year, you must actively re-enroll during open enrollment every year.
Contribution Amounts: Minimum and Maximum
When participating in DCAP, you can decide how much to contribute for the plan year. There are both minimum and maximum contribution limits:
- Minimum Contribution: The minimum annual contribution is $120.
- Maximum Contribution:
- $5,000 annually: For single individuals or married couples filing jointly.
- $2,500 annually: For married individuals filing separate income tax returns.
To estimate your potential tax savings based on your contribution amount, you can utilize online tools like the Tax Savings Calculator provided by Navia Benefit Solutions.
Important Note: Once the plan year begins, you generally cannot change your elected contribution amount unless you experience a qualifying event that triggers a special open enrollment.
Submitting Claims for Reimbursement
After incurring eligible dependent care expenses, you will need to submit a claim to receive reimbursement from your DCAP account. Navia Benefit Solutions manages the DCAP program, and claims can be submitted through various convenient methods:
- Online Portal: Through the Navia Benefit Solutions website.
- Navia Benefits Debit Card: For direct payment at eligible providers (if applicable).
- Mobile App: Using the Navia Benefits mobile app available for iPhone and Android.
- Email: By sending your claim to [email protected].
- Fax: To 425-451-7002 or toll-free 1-866-535-9227.
- Mail: To Navia Benefit Solutions, PO Box 53250, Bellevue, WA 98015-3250.
You can begin submitting claims as soon as the plan year starts on January 1st. However, reimbursements are limited to the funds currently available in your DCAP account at the time of the request. Importantly, the dependent care services must have already been provided before you can submit a claim for reimbursement.
Deadlines for Spending Funds and Submitting Claims
It’s crucial to be aware of the deadlines associated with DCAP to avoid forfeiting your contributions.
- Expense Deadline: Eligible dependent care expenses must be incurred by December 31st of each plan year.
- Claim Submission Deadline: You must submit all claims for reimbursement to Navia Benefit Solutions by March 31st of the following year.
If you do not enroll in DCAP for the following year, your account will be closed on March 31st, and any remaining balance will be forfeited according to IRS regulations. Once forfeited, these funds cannot be reclaimed.
DCAP Funds After Coverage Ends
If your employment terminates and you have unspent funds in your DCAP account, you can still submit claims for eligible expenses incurred up to December 31st of the plan year, as long as these expenses allowed you to work, look for work, or attend school full-time during that period. The deadline for submitting these claims remains March 31st of the following year. However, you cannot incur new eligible expenses after your employment ends or after December 31st of the plan year. There are no continuation coverage rights for DCAP beyond this period.
For detailed information regarding the termination of coverage, consult the DCAP Enrollment Guide on Navia’s website or contact Navia customer service directly at 1-800-669-3539 or via email at [email protected].
In conclusion, understanding what is a Dependent Care Assistance Program and its intricacies is essential for eligible employees seeking to manage dependent care costs effectively. By leveraging the pre-tax benefits of DCAP and adhering to the program’s guidelines and deadlines, you can significantly reduce your financial burden while ensuring quality care for your dependents.
