Dependent Care FSA Eligibility & Election
You are eligible for the Dependent Care FSA if you are eligible for a Vacation Benefit under the Plan, and make a timely election to allocate a portion of the Vacation Benefit payments to the Dependent Care FSA. You can elect Dependent Care FSA benefits during the annual election period in the month of December. You must complete the Dependent Care Election Form from the Fund Office to allocate part of your Vacation Benefit to the Dependent Care FSA and return it to the Fund Office by the annual deadline of December 31st.
DEPENDENT CARE FAQs
Your election of the Dependent Care FSA remains in place for the entire year unless you have a qualifying change in circumstances. For the Dependent Care FSA, that means you can make a change that corresponds to a change in your life that affects dependent care needs such as the following events.
- There is a significant change in the cost or coverage of dependent care, such as a change in the dependent care provider (subject to limits on care by relatives in the Internal Revenue Code).
- Your legal marital status changes, including marriage, death of a Spouse, divorce or dissolution of a marriage or qualified covered partnership, legal separation, or annulment;
- You have a new child, by birth, adoption, or placement for adoption.
- A dependent passes away.
- You or your spouse stops working, returns to work, or needs to relocate
- A change in employment status of an Eligible Employee, Spouse, or dependent of an Eligible Employee that causes the individual to become or cease to be eligible for this Plan;
- Your dependent loses eligibility for the Dependent Care FSA, such as reaching age 13.
- You move to a new residence.
You must notify the Fund Office in writing within 30 days of a change and submit a new election form on a timely basis to make a change. The change will only affect future deposits to your Dependent Care FSA for the year.
You can allocate Vacation Benefit money to the Dependent Care FSA up to an annual maximum under Section 129 of the Internal Revenue Code (IRC). The maximum current annual limit generally is $5,000 per year. The limit is $2,500 if you are married and reside together, but file a separate federal income tax return and also cannot exceed the lesser of the earned income (as defined in IRC Section 32) of you or your spouse (with a special limit for student and disabled spouses). The more practical limit is the sum
of your Vacation Benefit payments which are the most you can allocate to the Dependent Care FSA.
If you elect to allocate Vacation Benefit money to the Dependent Care FSA, a non-interest bearing dependent care account will be set up to keep a record of claims and payments for the Dependent Care Reimbursements to you. The Dependent Care FSA is not an actual account; it is merely a bookkeeping account in the Fund office.
When you complete a Vacation / Dependent Care form with an allocation to the Dependent Care FSA, your quarterly Vacation Benefit payments will be allocated to the Dependent Care FSA until the FSA allocation is funded.
- For example, assume you will work 2,000 hours in a year and earn gross Vacation Benefits of $1,500 for a year ($375.00 per quarter). If you elect $750.00 for the Dependent Care FSA, the gross amount of the quarterly Vacation Benefit payment for $375.00 in May will be allocated to fund your Dependent Care FSA, and another $375.00 will be allocated in August for a total of $750.00 in the Dependent Care FSA for the year. Your November and February payments will then be made as Vacation Benefits, net of taxes.
- You will not have to pay Social Security or income taxes on money that is allocated the Dependent Care FSA. The amount that is available to your Dependent Care FSA account at any particular time will be whatever has been credited to such Account less any reimbursements already paid for the year.
The Dependent Care FSA is not insured and is funded solely by employer contributions.
Generally, an expense must meet all of the following conditions for it to be a Dependent Care Expense:
- Annual Period: The expense is incurred for services rendered after your election and during the calendar year to which it applies. In other words, an allocation for 2019 only covers expenses incurred in 2019.
- Dependent: The person for whom you incur the expense is:
- A dependent age 12 or under who resides with you and for whom you are entitled to a personal tax exemption as a dependent (on your federal tax return) or lives with you after a divorce, even if you have permitted the non-custodial parent to take the exemption; or
- A spouse or other tax dependent who is physically or mentally incapable of caring for himself or herself. If the expense is incurred for services outside your household and such expenses are incurred for the care of a dependent who is age 13 or older, the dependent must regularly spend at least 8 hours per day in your home.
- Dependent Care: The expenses you incur are for the main purpose of the well-being and protection of a qualifying dependent. Fees you pay to find or retain a provider and transportation charges by a provider can qualify. Child support payments do not qualify.
- Education: Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care. Expenses to attend kindergarten or a higher grade are not expenses for care. However, expenses for before or after school care of a child in kindergarten or a higher grade may be expenses for care.
- Summer Break: Summer school and tutoring programs are not for care and the cost of sending your child to an overnight camp is not considered a work related expense. However, the cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer.
- Living Expenses: Expenses for household services qualify if part of the services is for the care of qualifying persons. Expenses for care do not include amounts you pay for food, lodging, clothing, education, and entertainment, unless they are incidental to and cannot be separated from the cost of care.
- Help for Work: The expense is incurred for dependent care to enable you (and your spouse if you file a joint tax return) to work or look for work for pay. The work can be for others or in your own business or partnership and can be either full time or part time, but cannot be volunteer work (even with a nominal salary). Work also includes actively looking for work. (However, if you or your spouse do not find a job and have no earned income for the year, you may hit an alternative test of the annual limit and lose the ability to exclude reimbursements from your income. See, How does the Dependent Care FSA work above.) An expense is not considered work-related merely because you incurred it while you were working. The purpose of the expense must be to allow you to work.
- Non-Family and Authorized Provider: The expense cannot be paid to you, your spouse, a parent (of the child receiving care), another child of yours who is under age 19 or an individual for whom you or your spouse is entitled to a personal tax exemption as a dependent on your federal income tax return. If the expense is incurred for services provided by a dependent care center (namely, a facility that provides care for more than 6 individuals not residing at the facility), the center complies with all applicable state and local laws and regulations.
You are encouraged to consult your personal tax advisor or IRS Publication 503 (Child and Dependent Care Expenses), for further guidance as to what is or is not a Dependent Care Expense if you have any doubts.
Claims: When you incur an eligible Dependent Care Expense, you submit a claim to the Fund Office on a claim form that will be supplied to you, which may require details on the provider and proof of payment or a debt for a Dependent Care Expense.
- If your Dependent Care FSA account balance is sufficient, you will be reimbursed for your Dependent Care Expenses on the next scheduled processing date.
- If your claim was for an amount that was more than your current Dependent Care Account balance, the excess part of the claim will be carried over into following months, to be paid out as your balance becomes adequate.
- However, you cannot be reimbursed for any expenses above your annual payments to your Dependent Care FSA account or for any expense incurred after the close of the Plan Year.
You will be notified in writing if any claim for benefits is denied.
You must submit all claims for reimbursement of Dependent Care Expenses incurred during a calendar year by February 1 of the following calendar year or the amount may be forfeited.
Tax Returns: In order to exclude the amount you receive as reimbursement for Dependent Care Expenses from your taxable income, you are generally required to provide the name, address and taxpayer identification number of the dependent care service provider and other information on your federal income tax return by completing IRS Form 2441.
If you participate in the Dependent Care FSA, you cannot claim the household and dependent care credit or any other tax benefit for the tax-free reimbursement amounts you receive from the Dependent Care FSA. The balance of your Dependent Care Expenses (namely, those for which you do not receive reimbursement) may be eligible for the dependent care credit.
If you over-estimate your Dependent Care Expenses for a year, you will only be entitled to receive payments for which were actually contributed to your account. Any Dependent Care FSA allocation over the amount of eligible receipts submitted by the deadline for the year must be forfeited under IRS rules. This is the trade-off for the tax free benefit, so be careful on your allocation.
Your Dependent Care FSA will also terminate and be forfeited for any reason that would cause you to lose Vacation Benefits for a year, such as fraud or misconduct against the Fund.