It’s putting family first
Childcare expenses are a reality for a large part of your employee population. Help them spend smartly by providing the option to enroll in a DC-FSA. Once an employee determines their annual election amount, regular, pre-tax contributions to the DC-FSA are deducted from their paychecks for the duration of the plan year.
Unlike the HC-FSA, the total election amount of the DC-FSA is not available January 1st. Employees can only be reimbursed for expenses equal to the amount of money they have already contributed to their DC-FSA via payroll deduction. When an employee incurs qualified daycare expenses, they can submit claims to be reimbursed from the DC-FSA. All claims must be substantiated or verified as an eligible expense. Submitting claims can be done online, on our mobile app, or by mail. Having a debit card with the DC-FSA provides easy access to DC-FSA dollars at daycare providers that accept debit card payments.
Pre-tax contributions
The money contributed to a DC-FSA is not subject to payroll taxes, so while an employee’s taxable income goes down, their take home pay goes up.
Tax-free distributions
When funds are used on qualified, eligible expenses, taxes don’t apply.
No health insurance plan needed
A DC-FSA is not tied to enrollment in a health insurance plan and can be offered to anyone. Employees can enroll in a DC-FSA and any other health account simultaneously.
What’s covered
In addition to traditional dependent care expenses like daycare and preschool, a DC-FSA can be used to pay for:
Adult daycare
When the adult is physically or mentally incapable of self care and qualifying tax dependent of the account holder
Summer camps
Includes athletic, day, summer, and holiday camp (does NOT include sleep-away camp)
Sick care
Unplanned dependent care is still considered a qualified expense
Before or after school programs
When it allows the accountholder and their spouse to be gainfully employed or to be seeking gainful employment
Elder care
Considered eligible in your home or in someone else’s residence
Contribution Limits
The IRS sets limits each year for maximum contributions to each type of account-based benefit. Individuals enrolling in a DC-FSA can contribute up to $5,000 on an annual basis. For married individuals filing separately, the annual maximum is $2,500.
Use this information as a reference, but please visit IRS.gov for the latest updates as this information is subject to change. To view the limits, please visit our IRS guidlelines and contribution limits page.
Document services
As a service to employers, HSA Bank offers the facilitation of Plan Documentation as well as Non-Discrimination Testing for Dependent Care Flexible Spending Accounts.
Plan Documentation
HSA Bank can facilitate the generation and maintenance of the written Plan Document and Summary Plan Description for DC-FSA plans. These documents are a crucial part of any benefit program offered by employer groups as they communicate the plan benefits and how each plan operates. All documents are stored electronically for later reference and include a date and time stamp of the original or any subsequent revisions.
Non-Discrimination Testing
HSA Bank can facilitate the Non-Discrimination Testing (NDT) for DC-FSA plans. The IRS requires employers to perform NDT each year. The reason for NDT is to prevent key and highly compensated employees from receiving a disproportionate amount of employer provided tax-free benefits as compared to the rank-and-file employees. NDT is an important component of plan compliance. Failure of an employer to satisfy the nondiscrimination testing requirements or take the necessary corrective measures can result in the inclusion of the discriminatory benefits in the income of highly compensated employees.
Additional Resources
Employer Resource Center
The HSA Bank Employer Resource Center contains materials and tools designed for you to promote education, engagement, and account management.
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Health & Wealth Index
The HSA Bank Health and Wealth IndexSM provides analytics and data so we can better understand the behaviors, habits and education level of healthcare consumers.
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