Childcare and eldercare expenses can significantly impact your family budget. The Dependent Care Assistance Program (DCAP) offers a valuable solution, allowing you to allocate pre-tax funds from your paycheck to cover eligible dependent care costs. This benefit can substantially reduce your taxable income, leading to considerable savings on taxes. If you’re seeking ways to manage dependent care expenses while working, attending school, or searching for employment, understanding the DCAP is crucial.
Who is Eligible for the Dependent Care Assistance Program?
Eligibility for the Dependent Care Assistance Program (DCAP) is specifically for PEBB benefits-eligible employees working at the following organizations:
- State agencies
- Higher education institutions
- Community or technical colleges
It’s important to note that DCAP eligibility is tied to your employer type, not your chosen medical plan. Enrollment in any medical plan type does not affect your ability to enroll in DCAP within the same year.
Important Eligibility Note: Employees working for city, county, port, tribal governments, water districts, hospitals, or similar entities are not eligible for the Dependent Care Assistance Program. This benefit is exclusively for Washington State public employees meeting the criteria outlined above.
How the DCAP Benefit Can Help You Save
The Dependent Care Assistance Program is designed to ease the financial burden of dependent care, which can be a major household expense. By participating in DCAP, you can set aside pre-tax money from your salary to pay for eligible care expenses for your dependents. This includes costs associated with:
- Elder day care services
- Babysitting and nanny services
- Day care facilities
- Preschool programs
- Registration fees for eligible care programs
The primary advantage of DCAP is the significant tax savings. When you elect to contribute to DCAP, the elected amount is deducted from your paycheck before taxes are calculated. This pretax deduction reduces your overall annual taxable income. Consequently, you lower the amount you pay in both FICA taxes (which are 7.65%) and federal income tax (which can be up to 37%, depending on your tax bracket) on the money you contribute to DCAP.
To qualify for DCAP, a dependent must meet specific criteria:
- Child Dependent: Must be age 12 or younger and reside with you.
- Adult Dependent: Must be age 13 or older, physically or mentally incapable of self-care, and live with you for a minimum of eight hours each day.
For more detailed information about the Dependent Care Assistance Program and related benefits, consider listening to the “Fund Your Future DRS podcast episode” which discusses saving on healthcare costs with both FSA and DCAP.
DCAP Enrollment: When and How to Sign Up
Enrolling in the Dependent Care Assistance Program is straightforward, but it’s important to be aware of the specific enrollment periods.
Note: Employees of the University of Washington and Washington State University have a separate enrollment process and must enroll through their Workday system.
There are several key times when you can enroll in DCAP:
Open Enrollment Period
This is the annual period when all eligible employees can enroll in or make changes to their benefits, including DCAP. This is the most common time to sign up for the program.
Initial Eligibility for Benefits
When you first become eligible for PEBB benefits as a new employee, you have the opportunity to enroll in DCAP as part of your initial benefits enrollment.
Special Open Enrollment Events
If you experience a qualifying life event, you may be eligible for a special open enrollment period, allowing you to enroll in or modify your DCAP election outside of the standard open enrollment. Common qualifying events include:
- Birth of a child
- Adoption
- Marriage
- Divorce
- Death of a spouse or dependent
Important Enrollment Reminder: DCAP enrollment does not automatically renew each year. To continue participating in the program, you must actively re-enroll during each open enrollment period.
Contribution Limits: How Much Can You Set Aside?
The Dependent Care Assistance Program has specific contribution limits to be aware of when planning your benefit elections.
The minimum annual contribution to DCAP is $120.
Maximum annual DCAP contribution limits are as follows:
- $5,000 annually: For individuals who are single or married couples filing a joint income tax return.
- $2,500 annually: For each married participant who files a separate income tax return.
To help you estimate your potential tax savings with DCAP, Navia Benefit Solutions provides a helpful online “Tax Savings Calculator”. This tool can assist you in determining the optimal contribution amount for your individual circumstances.
Important Contribution Note: 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. Any changes must be consistent with the qualifying event.
Submitting Claims for Reimbursement
Accessing your DCAP funds to reimburse eligible dependent care expenses is a simple process. Once you incur an eligible expense, you can submit a claim for reimbursement through various convenient methods:
- Online Portal: Submit claims and manage your account through the Navia Benefit Solutions website.
- Navia Benefits Debit Card: Use your Navia Benefits Debit Card to pay for eligible expenses directly at the point of service.
- Mobile App: Utilize the Navia Benefits mobile app, available for both iPhone and Android devices, to manage claims and account information on the go.
- Email: Submit your claim forms via email to Navia claims.
- Fax: Fax your claim forms to Navia Benefit Solutions.
- Mail: Mail your claim forms to Navia Benefit Solutions via postal service.
You can begin submitting claims for eligible expenses incurred on or after January 1st of the plan year. However, reimbursement is limited to the funds available in your DCAP account at the time of your claim. It’s also important to note that services must be rendered before you can request reimbursement.
Deadlines for Spending and Claiming DCAP Funds
Understanding the deadlines associated with your DCAP funds is crucial to avoid forfeiting any unused contributions.
Eligible dependent care expenses must be incurred by December 31st of each plan year.
You must submit all claims for reimbursement to Navia Benefit Solutions by March 31st of the following year. Your DCAP account will be closed on March 31st of the following year unless you re-enroll for the subsequent plan year.
If you do not re-enroll for the following year and have a remaining balance in your account after March 31st, these funds will be forfeited to the Health Care Authority, as mandated by IRS regulations. Once forfeited, these funds cannot be reclaimed.
DCAP Funds After Coverage Termination
If you leave your employment and have unspent funds in your DCAP account, you can still submit claims for eligible expenses incurred up to December 31st of the plan year, through the claims run-out period which ends on March 31st of the following year. This is contingent on the expenses being necessary for you (and your spouse or state-registered domestic partner) to attend school full-time, look for work, or work. Reimbursements are limited to your account balance. It is important to note that you cannot incur new expenses after December 31st of the plan year if you are no longer employed. There is no option for continuation coverage for the Dependent Care Assistance Program.
For more detailed information regarding the end of coverage and other DCAP-related queries, refer to the DCAP Enrollment Guide on Navia’s website. You can also contact Navia directly by phone or email for customer service assistance.
