Navigating the costs of dependent care can be a significant financial challenge for working 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 guide will walk you through everything you need to know about the Dependent Care Assistance Program Dcap, from eligibility and enrollment to maximizing your savings.
DCAP Eligibility: Are You Qualified?
The Dependent Care Assistance Program DCAP is a benefit designed for specific employee groups. Eligibility for DCAP is primarily for PEBB benefits-eligible employees working within Washington State public sector. This includes those employed by:
- State agencies
- Higher education institutions
- Community and technical colleges
It’s important to note that DCAP benefits are not available to employees of cities, counties, ports, tribal governments, water districts, hospitals, or similar entities. Even if you are enrolled in any type of medical plan, you can still enroll in DCAP within the same year, provided you meet the core eligibility criteria of working for a qualified state employer.
How the Dependent Care Assistance Program DCAP Saves You Money
Child care and elder care expenses can quickly add up, becoming a major part of a family’s budget. The DCAP is designed to alleviate this burden by allowing you to use pre-tax dollars for eligible dependent care. Here’s how the Dependent Care Assistance Program DCAP helps you save:
By enrolling in DCAP, you decide on an amount to be deducted from your paycheck before taxes are calculated. This pre-tax deduction lowers your overall taxable income for the year. As a result, you reduce the amount you pay in both FICA taxes (Social Security and Medicare) at 7.65% and federal income tax, which can be up to 37% depending on your tax bracket. These savings can significantly reduce your out-of-pocket expenses for dependent care.
Eligible expenses under the Dependent Care Assistance Program DCAP include:
- Child day care
- Preschool
- Babysitting fees
- Elder day care
- Registration fees for care facilities
To qualify for DCAP, your dependent must meet specific criteria:
- For children: Must be age 12 or younger and live with you.
- For older dependents: Must be age 13 or older, physically or mentally incapable of self-care, and reside in your household for at least eight hours each day regularly.
For a deeper dive into the advantages, consider listening to resources like the “Fund Your Future DRS podcast episode: Save on healthcare costs with FSA and DCAP”, which further explains the benefits of DCAP and similar programs.
Enrolling in the Dependent Care Assistance Program DCAP
Enrolling in the Dependent Care Assistance Program DCAP is straightforward, but the process depends on your employer.
For employees of the University of Washington and Washington State University, enrollment is managed through Workday.
For all other eligible employees, you can enroll during several key periods:
- Open Enrollment: This is the annual period when you can elect benefits for the upcoming plan year.
- Newly Eligible for Benefits: When you first become eligible for PEBB benefits as a new employee.
- Special Open Enrollment Event: If you experience a qualifying life event, such as marriage, birth of a child, adoption, or divorce, you may be eligible for a special enrollment period.
Remember, DCAP enrollment does not automatically renew each year. You must actively enroll every plan year you wish to participate in the Dependent Care Assistance Program DCAP. Make sure to re-elect this benefit during open enrollment each year if you want to continue saving.
DCAP Contribution Limits: How Much Can You Set Aside?
Understanding the contribution limits is crucial for effective planning with the Dependent Care Assistance Program DCAP. The minimum annual contribution is $120.
The maximum annual DCAP contributions are set by the IRS and are:
- $5,000 annually for single individuals or married couples filing jointly.
- $2,500 annually for each married participant filing separately.
To help you determine the best contribution amount for your situation and see potential tax savings, Navia Benefit Solutions provides a helpful Tax Savings Calculator. This tool can give you a clearer picture of the financial advantages of participating in the Dependent Care Assistance Program DCAP.
It’s important to note that you generally cannot change your elected contribution amount after the plan year begins. Exceptions are made only for qualifying events that trigger a special open enrollment, such as birth, adoption, marriage, or divorce. Any change must be consistent with the qualifying event.
Submitting Claims and Getting Reimbursed with DCAP
Accessing your DCAP funds is designed to be convenient. Once you incur an eligible expense, you can submit a claim for reimbursement through several methods:
- Online Portal: Via the Navia Benefit Solutions website.
- Navia Benefits Debit Card: For direct payment at eligible providers.
- Mobile App: Using the Navia Benefits mobile app available for both iPhone and Android.
- Email: Submit your claim forms to Navia claims.
- Fax: Fax your claim documents to 425-451-7002 or toll-free at 1-866-535-9227.
- Mail: Send your claim forms via mail to Navia Benefit Solutions, PO Box 53250, Bellevue, WA 98015-3250.
Reimbursements can be requested as soon as the plan year starts on January 1. However, reimbursement is limited to the funds currently available in your DCAP account. Ensure that services have been provided before submitting your claim.
DCAP Deadlines: Spending and Claiming Your Funds
To effectively manage your Dependent Care Assistance Program DCAP funds, be aware of critical deadlines. DCAP expenses must be incurred by December 31 of each plan year.
The deadline to submit all claims for reimbursement to Navia Benefit Solutions is March 31 of the following year. If you do not enroll in DCAP for the subsequent year, your account will close on March 31, and any remaining balance will be forfeited according to IRS regulations and returned to the Health Care Authority. Once funds are forfeited, they cannot be reclaimed.
What Happens to Your DCAP Funds if You Leave Employment?
If you terminate your employment while having unspent DCAP funds, you can still submit claims for eligible expenses incurred through December 31 of the plan year, as long as these expenses allowed you to work, look for work, or attend school full-time during your employment. Claims can be submitted until the end of the claims run-out period, which is March 31 of the following year, up to your account balance. However, you cannot incur new expenses after December 31 of your final plan year. It’s important to know that there are no continuation coverage rights for DCAP beyond this period.
For detailed information about coverage termination and other aspects of the Dependent Care Assistance Program DCAP, consult the DCAP Enrollment Guide on Navia’s website or contact Navia customer service directly at 1-800-669-3539 or via email.
By understanding and utilizing the Dependent Care Assistance Program DCAP, eligible employees can achieve significant savings on dependent care costs, making it a valuable component of your employee benefits package.
