Dependent Care Flexible Spending Accounts

Key Takeaway

The dependent care assistance program, or DCAP, allows employees to pay for work-related child or dependent care expenses (for children under age 13 and/or older dependents who are incapable of self-care) with pre-tax dollars. Pre-tax means before state, federal, Social Security, and Medicare taxes are applied.

How It Works

Prior to each plan year, employees elect how much they would like to have taken out of their paycheck on a pre-tax basis. Contributions are deducted from each payroll. As eligible expenses are incurred, employees submit claims to Alerus for reimbursement. Alerus is required to substantiate each claim by reviewing receipts, and/or claim forms to ensure expenses meet applicable regulations. Alerus reimburses employees by check or direct deposit. Your plan may also include a debit card for making purchases directly.

Reimbursement by a Dependent Care FSA must be for services provided to allow employees and, if applicable, their spouses to be actively and gainfully employed. This means an employee can only claim services incurred while they are at work. Dependent Care services incurred while an employee is on a leave of absence are not reimbursable, although services incurred during temporary absences from work, for matters like illness or vacation, can be reimbursed. Reimbursement for dependent care expenses cannot exceed the amount that has been withheld from an employee’s pay. If the amount of claims submitted exceeds the account balance, the available balance will be paid and the remaining claim balance will be paid as future contributions occur.

Important Facts

Unused amounts are forfeited at the end of the plan year.
New elections are required each plan year.
Elections are irrevocable during the plan year unless there is a qualified change in status.
IRS Publication 503 (available at irs.gov) explains qualified dependent care expenses. A tax credit is also available for dependent care. Employees should make careful consideration and/or contact a tax professional to determine which works better for them – the tax credit or the Dependent Care FSA.
For current limits, please check the Plan Design Checklist. Log in to your plan online and click on Tools & Support.

Eligible Expenses

Before/After-school Care
Day Camp
Daycare Center
Dependent Care Center
Elder Care
In-Home Daycare
Montessori (Pre-K Only)
Nanny
Preschool/Nursery School
Registration Fees (to obtain care)
Sick-child Facility

Submitting Claims

You can submit claims online, through the Alerus Benefits mobile app, or by completing a Reimbursement Request Form. Always include documentation to support the expenses you are claiming. Claims cannot be paid until itemized documentation is submitted to and approved by Alerus.

Supporting Documentation

You must have one of the following valid receipts to substantiate your claim. Itemized bill/receipt of service which includes:

Care provider name
Social Security/Tax ID number
Dates of service
Dependent name(s)
Dependent care receipt