Dependent Care Flexible Spending Account
The Dependent Care Flexible Spending Account reimburses you for certain, qualified dependent care expenses that are necessary to enable you, and your spouse if you are married, to work or attend school full-time. If you are married, your spouse must also work or be a full-time student at least five months out of the calendar year, or be disabled. You may put up to $5,000 a year per family into your Dependent Care FSA.
IMPORTANT NOTE:
To preserve the tax advantages of the flexible spending accounts (and of the Flexible Benefits Plan generally),
it is important that the dependent care salary reduction option not be used disproportionately by higher-paid
participants. The university will, if necessary, reduce or stop contributions by higher-paid participants to
prevent such disproportionate use. You will be notified during the plan year of any necessary adjustment to
your contribution amount resulting from the required discrimination testing.
Dependents are defined as anyone for whom you provide more than 50% of the financial support for the year, as defined in Section 152 of the Internal Revenue Code and who resides in your home a minimum of eight hours per day. Expenses for the following dependents are eligible for reimbursement:
- Children under age 13
- Any dependent (including your spouse or parent) who is physically or mentally incapable of taking care of himself or herself
For a complete list of eligible expenses, visit http://www.wageworks.com.
Use It or Lose It
You may only be reimbursed for expenses you incur during the plan year, and any unused money you forfeit. (You have until April of the following year to submit receipts for expenses you incurred during the plan year.)
How Contributing Affects Your Take-Home Pay
The Dependent The Dependent Care FSA lets you use before-tax dollars to pay for eligible dependent care expenses. That means you are paying for dependent care expenses with money that is taken from your pay before Social Security taxes and federal, state, and local (where applicable) income taxes are deducted. Contributing money before taxes are taken out reduces your gross salary. This lowers your taxable income and, therefore, lowers the amount of income tax you pay.
How Contributing Affects Your Social Security Benefit
The money you contribute to your Dependent Care FSA is not subject to Social Security taxes. Since you will pay less Social Security tax, your future Social Security benefit may be smaller than it would be if you did not participate in the Dependent Care FSA. If your pay exceeds the Social Security Wage Base, your future Social Security benefits may not be affected by contributing before-tax dollars to the Dependent Care FSA.
