Managing dependent care costs can be a significant financial challenge for many families. The Dependent Care Assistance Program (DCAP) offers a valuable solution, allowing eligible employees to set aside pre-tax funds to cover these essential expenses. This program can substantially reduce your taxable income while ensuring your loved ones receive the care they need.
Who Can Enroll in the Dependent Care Program?
Eligibility for the Dependent Care Assistance Program is specifically for PEBB benefits-eligible employees. This benefit extends to those working at:
- State agencies
- Higher education institutions
- Community or technical colleges
It’s important to note that your choice of medical plan does not affect your DCAP eligibility; you can enroll in DCAP regardless of your medical plan and even in the same year.
However, employees of cities, counties, port authorities, tribal governments, water districts, hospitals, and similar entities are, unfortunately, not eligible for the Dependent Care Program.
How the Dependent Care Program Benefits You
The Dependent Care Program is designed to ease the financial burden of child care and elder care, which often represent a major family expense. By participating in DCAP, you can allocate a portion of your paycheck on a pre-tax basis to pay for qualifying dependent care costs. This is particularly helpful while you, and your spouse or state-registered domestic partner, are working, attending school full-time, or actively seeking employment. Eligible expenses are broad and include services such as elder day care, babysitting, day care facilities, preschool, and even registration fees associated with these services.
The key advantage of the Dependent Care Program lies in its tax-saving potential. When you contribute to DCAP, the elected amount is deducted from your paycheck before taxes are calculated. This pre-tax deduction means you reduce your annual taxable income, leading to significant savings. You won’t pay FICA taxes (at a rate of 7.65%) or federal income tax (which can be up to 37%, depending on your tax bracket) on the money you contribute to your DCAP account.
To be considered a qualifying dependent under the Dependent Care Program, the individual must meet specific criteria:
- Be age 12 or younger and reside with you in your home.
- Be age 13 or older and incapable of self-care, whether due to physical or mental limitations, and must regularly spend at least eight hours each day in your household.
For deeper insights into leveraging the Dependent Care Program, consider exploring resources like the Fund Your Future DRS podcast episode, which offers valuable information on saving healthcare costs with both FSA and DCAP.
Enrollment in the Dependent Care Program
For employees at the University of Washington and Washington State University, enrollment in the Dependent Care Program is managed through the Workday platform.
For all other eligible employees, you can typically enroll in the Dependent Care Program during several key periods:
Open Enrollment
This annual period is your standard opportunity to elect benefits for the upcoming plan year, including DCAP.
Initial Benefits Eligibility
When you first become eligible for PEBB benefits, you can enroll in DCAP as part of your new employee enrollment.
Special Open Enrollment Events
Certain life events, such as the birth or adoption of a child, marriage, or divorce, may trigger a special open enrollment period, allowing you to enroll in or modify your DCAP election.
Remember, enrollment in the Dependent Care Program is not automatic and does not carry over from year to year. To participate each plan year, you must actively enroll during one of the eligible enrollment periods.
Contribution Amounts to Your Dependent Care Program
The Dependent Care Program has guidelines for contribution amounts to ensure compliance with IRS regulations.
The minimum annual contribution to DCAP is $120.
Maximum annual contributions are set to comply with IRS limits:
- For individuals who are single or married couples filing jointly, the maximum annual contribution is $5,000.
- For married participants who file separate income tax returns, the maximum annual contribution is $2,500 each.
To better understand the potential tax savings based on your contribution, Navia Benefit Solutions provides a helpful Tax Savings Calculator online.
It’s important to be aware that once the plan year has started, you generally cannot change your elected contribution amount unless you experience a qualifying life event that triggers a special open enrollment. Qualifying events typically include significant life changes such as birth, death, adoption, marriage, or divorce. Any election change must be directly related to and consistent with the qualifying event.
Submitting Claims for Reimbursement
Once you incur an eligible dependent care expense, you can submit a claim to request reimbursement from your Dependent Care Program account. Navia Benefit Solutions offers multiple convenient methods for submitting your claims:
- Online Portal: Access your account and submit claims through the Navia Benefit Solutions website.
- Navia Benefits Debit Card: For direct payment at eligible providers.
- Mobile App: Utilize the Navia Benefits mobile app, available for both iPhone and Android devices, to manage your account and submit claims on the go.
- Email: Submit your claim documentation via email to Navia claims.
- Fax: Fax your claims to 425-451-7002 or toll-free at 1-866-535-9227.
- Mail: Send your claims via mail to Navia Benefit Solutions at their designated PO Box in Bellevue, WA.
You can begin submitting claims for eligible expenses incurred from the start of the plan year, which is January 1st. However, reimbursement is contingent on having sufficient funds in your DCAP account at the time of your request and can only be processed after the dependent care services have been provided. Reimbursement will be up to the dollar amount you have contributed to your DCAP account at the time of the request.
Deadlines for Spending and Claiming Funds
It’s crucial to adhere to the timelines associated with the Dependent Care Program to maximize your benefits.
All dependent care expenses must be incurred by December 31st of each plan year. To receive reimbursement, you must submit all claims to Navia Benefit Solutions no later than March 31st of the following year. Your DCAP account remains active until March 31st of the following year, provided you are enrolled for the subsequent year.
If you do not re-enroll for the following year, your account will be closed on March 31st, and any remaining balance will be forfeited to the Health Care Authority, as mandated by IRS regulations. Once funds are forfeited, they cannot be reclaimed.
What Happens to DCAP Funds When Coverage Ends?
If your employment terminates and you have unspent funds in your Dependent Care Program account, you are still eligible to submit claims for eligible expenses incurred up to December 31st of the plan year. Claims can be submitted through the claims run-out period, which ends on March 31st of the following year. The expenses must have allowed you (and your spouse or state-registered domestic partner) to work, look for work, or attend school full-time. Reimbursements are limited to your remaining account balance. Importantly, you cannot incur new expenses after December 31st of the plan year following your termination. There are no provisions for continuation coverage under the Dependent Care Program.
For detailed information regarding the termination of coverage and other aspects of the Dependent Care Program, consult the DCAP Enrollment Guide available on Navia’s website. You can also reach out to Navia directly for assistance by calling 1-800-669-3539 or sending an email to Navia customer service.
The Dependent Care Program provides a significant opportunity for eligible employees to save on taxes while managing dependent care expenses effectively. Understanding the program’s rules and deadlines is key to making the most of this valuable benefit.
