Dependent Care Flexible Spending Account (DCFSA) overview
The Dependent Care Flexible Spending Account (DCFSA) is a pre-tax benefit allowing employees to set aside funds for eligible dependent care expenses, effectively lowering their taxable income. Below is an overview to assist HR administrators in managing and supporting employees with Dependent Care FSA questions.
Contribution limits
Current IRS contribution limits for Dependent Care FSA are as follows:
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$5,000 per household for married couples filing jointly or for single parents.
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$2,500 per individual for married couples filing separately.
Check current IRS guidelines or your company plan documents for the most up-to-date limits.
Eligible expenses
Dependent Care FSA funds can be used for a variety of care-related expenses, such as:
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Childcare: Daycare, preschool, and babysitting services for children under age 13.
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Programs: After-school programs and day camps (excluding overnight camps).
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Dependent care: Care expenses for a spouse or parent needing assistance.
For a full list of eligible expenses, please review the plan documents available in the Level App.
Employee eligibility requirements
Eligible employees must have qualifying dependents and must incur expenses while actively working or seeking employment. Specific eligibility details can be found in the Level app or through your HR team.
Explicit enrollment
Requires an enrollment file or manual action to specific details about new enrollments or enrollment changes. This enrollment type is frequently used for Flexible Spending Accounts.
Making a purchase
Employees can use their Dependent Care FSA in two ways:
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Direct payment to provider: Employees can pay their provider directly, then submit a claim in the Level App.
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Level Card: If available, employees may use their Level Card for direct payment, though some claims may require additional documentation.
Prorated claims
For multi-month expenses, such as ongoing daycare, employees should submit claims on a prorated basis, ensuring each period is covered appropriately.
Year-end grace period
Some FSAs offer a 2.5-month grace period at the end of the plan year, allowing employees to use remaining funds. Level provides an intake form during onboarding for your selected plans, which include an exhaustive list of all eligible coverage categories as well as customizable plan design features for the selected plan, including grace periods and run-out periods. Please feel free to reach out to your account manager or success@level.com to request our intake form for your review and plan configuration.
Termination
In most cases, remaining funds are limited to the grace period or are available only for eligible expenses incurred up to the termination date. For details on how termination affects Dependent Care FSA, reach out to your account manager or success@level.com for more information. The specific treatment may vary, so it’s essential to confirm the company’s stance and communicate it to departing employees if needed. All terminated employees will continue to have access to their Level account only to review past transactions and expenses.