Dependent Care

6 Questions on Dependent Care Spending Accounts | North Carolina Employee Benefits

School’s out! Summer is here, and it’s the time of year when working parents have questions about using their Dependent Care Spending Accounts (DCSAs). Are summer camp expenses eligible? What about day versus overnight camps? Employers and benefit advisors want to be ready with answers about this valuable benefit program.

The following are the top summertime questions about DCSAs and reimbursable expenses:

1. What are the basic rules for reimbursable expenses?

Dependent care expenses, such as babysitting and daycare center costs, must be work-related to qualify for reimbursement. Work-related means the expenses are for the care of the employee’s child under age 13 to allow the employee to work. If the employee is married and filing jointly, the employee’s spouse also must be gainfully employed or looking for work (unless disabled or a full-time student).

In some cases, expenses to care for a disabled dependent, regardless of age, may be reimbursable. This article focuses on expenses for children under 13 since those are by far the most common type of DCSA reimbursement.

2. One of our employees and his family are taking a two-week vacation this summer, but his children’s daycare center will charge its regular fee. Are the expenses reimbursable even if the employee and spouse are off work?

Yes. In most cases, expenses are not eligible unless the dependent care services are necessary for the parents to work, but some exceptions apply. The IRS rules for DCSAs provide that expenses during short, temporary absences are eligible if the employee has to pay the child’s care provider. Absences of up to two weeks are automatically considered short, temporary absences. Depending on the circumstances, longer absences also may qualify.

3. During the school year, our employee uses her DCSA for her 10-year old’s after-school daycare center expenses. This summer, the child’s daycare will be provided by her 20-year old sister. If the older daughter bills for her services, are the costs eligible for reimbursement?

The answer depends on whether the employee or spouse can claim the older daughter as a tax dependent. If the older daughter can be claimed as a dependent, whether or not the employee actually claims her, she is not a qualifying dependent care provider under the DCSA rules.

If the older daughter cannot be claimed as a tax dependent, her charges for providing care are eligible expenses. The specific rule is that a child of the employee, whom the employee cannot claim as a dependent, may be a qualifying provider if the child is age 19 or older by the end of the year.

Note that the employee’s spouse or the child’s parent is never a qualifying provider.

4. One of our employees has to pay an application fee and deposit before her child starts attending a daycare center this summer. Are those expenses eligible for reimbursement?

Prepaid expenses are eligible for DCSA reimbursement, provided the costs are required in order for the child to receive care. In this case, after the daycare center begins providing care, the employee can be reimbursed for the application fee and deposit she paid. On the other hand, if the employee cancels and her child does not attend, then the application fee and deposit are not eligible expenses.

5. An employee will pay day camp expenses for his 8-year-old son and overnight camp expenses for his 12-year-old daughter this summer. Are both types of expenses eligible for reimbursement?

The day camp expenses generally are reimbursable. Expenses for overnight camp, however, are not eligible since overnight care is not work-related.

Under the IRS rules for DCSAs, expenses for food, lodging, clothing, education, and entertainment are not reimbursable. If, however, such expenses are small, incidental expenses that cannot be separated from the cost of caring for the child, they may be included for reimbursement. For instance, the day camp may include lunch, snacks, and some sports activities in its basic fee, which would be eligible for reimbursement.

6. An employee’s children go to private year-round schools. He pays tuition for one child’s grade school and fees for the other child’s nursery school. Are both types of expenses eligible for reimbursement?

Educational expenses are not reimbursable, unless the educational services are merely incidental as part of a child care service. Expenses to attend kindergarten or a higher grade are educational, so the older child’s school fees are not eligible for DCSA reimbursement. (Expenses for before- or after-school care, however, may qualify as reimbursable expenses.)

On the other hand, expenses for a child in nursery school, preschool, or a similar program for children below the level of kindergarten are expenses for care. Such expenses are not considered educational even though the nursery school may include some educational activities.

Originally published by www.thinkhr.com

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Utilize FSA Monies with Key Year–End Strategies

‘Tis the Season’. Like most, you‘re probably in the midst of the “hustle and bustle” of this holiday season with dinners, parties, and activities; Christmas shopping; and spending those remaining FSA dollars you have allocated this year.  

Wait, what? Yes, you read right. Chances are, if you’ve opted to utilize an employer-sponsored FSA account in 2017, you may have remaining funds you’ll need to spend. This is especially true if your employer opted for the $500 carryover rule in lieu of a grace period. Regardless of what flexible spending account you have, here are some strategies to get the most out of this benefit before year end.

Medical Care

Medical FSAs are the most common supplemental flexible coverage offered under employer benefit plans. If you’ve elected this coverage for 2017, here are a few things to consider when spending these funds.

Routine and Elective Medical Procedures

Whether routine or not, now’s the time to get appointments booked. If your employer offers a grace period for turning in receipts, you can book appointments into the first couple of months of the New Year and get reimbursed from this year’s funds without affecting 2018’s contributions. This has a two-fold advantage, as you can also spread next year’s deductible over the coming year.  

Several routine and elective procedures that are FSA-eligible include:

·        Lasik

·        Sleep Apnea/Snoring

·        Hernia surgery

·        Colonoscopy

·        Smoking/Weight Loss Cessation Programs

Alternative Therapies

Under IRS law, certain alternative therapies are eligible for reimbursement. Acupuncture and chiropractic care, alternative medicinal treatments, and herbal supplements and remedies are a great way to use up your funds for the year and get a little cash back when you most need it.

Dental

Dental benefits often work differently than medical coverage. According to the American Dental Association, this benefit is often capped annually – generally between $1,000 and $3,000.  If you have unused funds remaining in your FSA, now may be the time to schedule a last-minute appointment with your dentist, especially if you might need serious work down the road. This way, you can use up the funds remaining in your account by year-end, and reduce your out-of-pocket expense next year by sharing the cost of additional dental services over a longer period of time.

Prescription Refills

Refilling your prescription medications at year end are a great way to use up your funds in your medical FSA. Take inventory of your prescription drugs, toss out expired ones, and make that call for a refill to your doctor or pharmacy.

Over the Counter Drugs, Medical Equipment and Supplies

Many OTC medications, medical equipment and supplies are eligible for reimbursement under a medical FSA. First-aid kits, blood-pressure monitors, thermometers, and joint braces are just a few.  Please note that some will require a note or prescription from your doctor.

Mileage and Other Healthcare-Related Extras

Traveling to and from any medical facility for appointments or treatment are eligible for reimbursement under your FSA. This not only includes traveling by your own vehicle, but also by bus, train, plane, ambulance service; and does include parking fees and tolls.

In addition, you can get reimbursed for other health-related expenses. These include:

·        Lodging and meals during a medical event.

·        Medical conferences concerning an illness of you or one of your dependents.

·        Advance Payments on a retirement home or long-term care.

Dependent Care

If you have opted to contribute to a DCFSA, you can get reimbursed for day care, preschool, summer camps and non-employer sponsored before and after school programs. In addition, funds contributed to this type of FSA can be used for elderly daycare if you’re covering more than 50% your parent’s maintenance costs.

Adoption Assistance

If you are contributing to an Adoption Assistance FSA offered by your employer, you can get reimbursed for any expenses incurred in the process of legally adopting an eligible child.  Eligible expenses include adoption fees, attorney fees and court costs, medical expenses for a child prior to being placed for adoption, and related travel costs in association with the adoption process.

Make the most out of your FSA contributions by using the above strategies to your advantage as we close out 2017. As you move into 2018, review the maximum contribution guidelines for the coming year as set by the IRS, and establish a game plan on expenditures next year. Seek your HR department’s expertise for guidelines and tips they can give you to maximize this valuable benefit package.

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