Child care and elder care costs can significantly impact family finances. A Dependent Care Assistance Program (DCAP) offers a valuable solution for eligible employees to manage these expenses more effectively. But What Is A Dependent Care Assistance Program, and how can it benefit you? This guide will explain everything you need to know about DCAP, from eligibility and enrollment to contribution limits and claim submissions, helping you understand if this program is right for you.
Understanding the Dependent Care Assistance Program (DCAP)
The Dependent Care Assistance Program, often referred to as DCAP, is a pre-tax benefit program offered by employers to help employees pay for eligible dependent care expenses. This program allows you to set aside a portion of your salary before taxes to cover costs related to caring for a qualifying dependent. By using pre-tax dollars, you can significantly reduce your overall taxable income, leading to potential tax savings.
Who is Eligible for DCAP?
Eligibility for DCAP is typically determined by your employer. Generally, to be eligible for DCAP, you must be an employee of an organization that offers this benefit. Specifically, for the context of this article, the Dependent Care Assistance Program is exclusively available to PEBB (Public Employees Benefits Board) benefits-eligible employees working at:
- State agencies
- Higher education institutions
- Community or technical colleges
It’s important to note that employees working for cities, counties, port authorities, tribal governments, water districts, hospitals, and similar entities are generally not eligible for this particular DCAP offering. Enrollment in any type of medical plan does not affect your eligibility for DCAP.
How DCAP Benefits You
The primary benefit of DCAP is the ability to pay for dependent care expenses with pre-tax dollars. This can result in substantial savings on taxes. When you contribute to a DCAP, the elected amount is deducted from your paycheck before taxes are calculated. This means you reduce your taxable income, lowering the amount you pay in both FICA taxes (Social Security and Medicare) and federal income tax. Depending on your tax bracket, the federal income tax savings alone can be up to 37% of your elected contribution, in addition to the 7.65% FICA tax savings.
Eligible expenses under DCAP are those necessary to enable you (and your spouse or state-registered domestic partner, if applicable) to work, look for work, or attend school full-time. These expenses can include:
- Child Care: Day care, preschool, babysitting, before and after school care.
- Elder Care: Adult day care for elderly dependents.
- Registration Fees: Fees required for enrollment in eligible care facilities.
To be considered a qualifying dependent for DCAP, the individual must meet specific criteria:
- Child Dependent: Must be age 12 or younger and live with you.
- Elder or Disabled Dependent: 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.
Enrollment and Contribution
Enrolling in DCAP is typically an annual process, and it’s crucial to enroll during the designated enrollment periods if you wish to participate.
How to Enroll in DCAP
There are specific times when you can enroll in DCAP:
- Open Enrollment: This is the annual period when you can enroll in or make changes to your benefits for the upcoming plan year. For DCAP, you must actively enroll each year during open enrollment if you want to participate, as enrollment does not automatically roll over from year to year.
- Initial Eligibility for Benefits: When you first become eligible for employee benefits, you can typically enroll in DCAP as a new hire.
- Special Enrollment Events: If you experience a qualifying life event, such as marriage, divorce, birth, adoption, or death in the family, you may be eligible for a special open enrollment period to enroll in or modify your DCAP election.
Note: Employees of the University of Washington and Washington State University often have specific enrollment procedures through platforms like Workday. Consult your HR department for university-specific enrollment instructions.
DCAP Contribution Limits
There are minimum and maximum limits to how much you can contribute to a DCAP account:
- Minimum Contribution: Generally, the minimum annual contribution is $120.
- Maximum Contribution: The IRS sets annual limits on DCAP contributions. For most individuals, the maximum annual contribution is:
- $5,000 for single individuals or married couples filing jointly.
- $2,500 each for married individuals filing separately.
It’s important to plan your contribution amount carefully during enrollment, as you generally cannot change your election amount during the plan year unless you experience a qualifying life event that aligns with the requested change. To help estimate potential tax savings based on your contribution, you can utilize online tax savings calculators, such as the Tax Savings Calculator provided by Navia Benefit Solutions.
Managing Your DCAP Funds
Once enrolled and contributing to DCAP, understanding how to access and manage your funds is essential.
Submitting Claims for Reimbursement
To access the funds you’ve contributed to your DCAP, you need to submit claims for eligible dependent care expenses you’ve incurred. There are several convenient ways to submit claims for reimbursement:
- Online Portal: Through the Navia Benefit Solutions website (Navia Benefit Solutions).
- Benefits Debit Card: You may receive a Navia Benefits Debit Card that can be used to pay for eligible expenses directly at participating providers.
- Mobile App: Utilize the Navia Benefit Solutions mobile app, available for both iPhone and Android devices (download for iPhone or Android).
- Email: Submit claims via email to Navia claims.
- Fax: Fax your claim forms to 425-451-7002 or toll-free at 1-866-535-9227.
- Mail: Send claims via mail to Navia Benefit Solutions, PO Box 53250, Bellevue, WA 98015-3250.
You can begin submitting claims for eligible expenses incurred from January 1st of the plan year. However, reimbursements are limited to the amount currently available in your DCAP account. Services must be provided before you can request reimbursement.
DCAP Spending Deadline
It’s crucial to be aware of the deadlines associated with DCAP funds. DCAP expenses must be incurred by December 31st of each plan year. To receive reimbursement for these expenses, you must submit all claims to Navia Benefit Solutions by March 31st of the following year. Your DCAP account will typically close on March 31st of the following year unless you re-enroll for the subsequent plan year.
What Happens to Unspent Funds?
If you do not use all of the funds in your DCAP account by the claim submission deadline of March 31st, any remaining balance will be forfeited according to IRS regulations. These forfeited funds are returned to the Health Care Authority and cannot be claimed by you after the deadline. Therefore, it’s essential to plan your contributions and expenses carefully to avoid losing any of your pre-tax funds.
If you terminate employment and have unspent DCAP funds, you can still submit claims for eligible expenses incurred up to December 31st of the plan year, as long as the expenses allowed you to work, look for work, or attend school full-time. Claims must be submitted by the March 31st run-out period and are limited to your account balance. Note that DCAP does not offer continuation coverage rights after employment termination.
In Conclusion
Understanding what is a dependent care assistance program and how it works can be incredibly beneficial for eligible employees facing dependent care expenses. DCAP offers a valuable opportunity to save money on taxes while ensuring your loved ones receive the care they need. By taking advantage of this pre-tax benefit, you can better manage your finances and reduce the financial burden of dependent care. For detailed information about your specific DCAP plan and enrollment process, consult your employer’s benefits resources or contact Navia Benefit Solutions directly at 1-800-669-3539 or via email at Navia customer service.
