Using an FSA to Pay for Dependent Day Care or Elder Care

Questions?
Contact MyFlex Advantage at
1-800-994-2752, option 2, option 3 or visit www.upmchealthplan.com/MyFlex.

Eligible Expenses for
Dependent/Elder Care FSAs:

day care facility fees
before-school and after-school care
local day camp
in-home sitting fees (income must be claimed by your care provider)
nursery school and preschool

Eligible dependents must be under age 13 or disabled if over age 13.

Eligible expenses are those incurred that allow you and your spouse to work, look for work, or attend school as a full-time student.

The above is not a complete list. For a complete list of eligible expenses, visit the MyFlex Advantage website at www.upmchealthplan.com/MyFlex.

Interested in a dependent care flexible spending account (FSA)? The first step is to review the eligible expenses listed at right and compare it to your out-of-pocket dependent day care or elder day care expenses. If you find you have qualifying expenses, contributing to a dependent care FSA can save you money by allowing you to pay for work-related dependent and elder care expenses with tax-free funds saving you 20 to 40 percent.

How Does a Dependent Care FSA Work?

When electing a dependent care FSA, you decide the amount to put into your account. A pretax deduction will be taken in equal installments from each pay during the year (coverage effective date through Dec. 31) to your total pledge amount. As you incur eligible expenses, you pay out-of-pocket and seek reimbursement from your FSA account. Funds are available for reimbursement when deposited into your account after each pay.

Contributions to Your Account: It’s Your Decision

How do you know how much to put into your dependent care FSA? A good way to start is by reviewing your dependent care expenses from the previous year and then estimate your anticipated expenses for the new plan year. There is an annual maximum of $5,000 per household (if married, $2,500 if filing separately). Note: Dependent care accounts can only be used for eligible day care expenses. This account is not for health care expenses for your dependents.

Accessing Your Funds

Participants in the dependent care FSA pay for the expense up front out-of-pocket and then submit for reimbursement. Dependent care claims are only able to be reimbursed as contributions are deposited into your account each pay. The FSA debit card cannot be used to pay for dependent care expenses.

Timeframe to Use and Claim the Funds

For dependent care FSA, expenses may only be incurred during the plan year. Once expenses have been incurred, all claims must be submitted by April 30 following the end of the plan year.

For example, staff electing a dependent care FSA for 2009 may incur expenses from their coverage effective date, through Dec. 31, 2009, and pay with FSA dollars contributed during 2009. April 30, 2010, is the final deadline to submit claims for services incurred from your coverage effective date, to Dec. 31, 2009.

Staff whose accounts terminate during the year, for reasons such as employment termination or a change to an ineligible job status, have until the end of the month their termination to incur expenses. All claims must be submitted by April 30 following the end of the plan year.

Don’t Forget – “Use It or Lose It”

Keep in mind that a "use it or lose it" rule applies to FSAs so it is important to estimate carefully when determining your annual pledge amount. The Internal Revenue Service requires participants to forfeit funds not used by the deadline.

Still Unsure?

Consider this example:

A staff member earning $30,000 annually has a child in day care while she and her spouse work. After adjusting for vacation and other times day care will not be needed, the care will cost $840 for the year.
The staff member chooses to contribute $840 for the year — or $70 per month — to her FSA to pay for the $840 in out-of-pocket costs for the day care in 2009.
The money she contributed to the dependent care FSA and the amount she was reimbursed are not subject to federal and Social Security (FICA) taxes. This staff member saw $840 deducted from her pretax income and saved $190 in taxes for the year.

Return to FSA Home Health Care FSA

Benefits described may not be applicable to all staff. Some business units have unique benefit programs, certain job classifications may affect benefit eligibility, and contract terms determine benefits for physicians and members of collective bargaining units.