Dependent Care Assistance Plan
Please be aware PayFlex is now the administrator of the Dependent Care Assistance Plan.
The Dependent Care Assistance Plan (DCAP) helps you pay for dependent care expenses for an eligible dependent in order for you (or you and your spouse) to work or to look for work.
Normally you would pay these expenses out of your take-home pay after taxes have been deducted. But with the DCAP, your contributions are deducted before paying taxes and deposited into your account. Then, when you have an eligible expense, you request a tax-free reimbursement. This helps you in two important ways:
- It provides a convenient way to budget for day care expenses as you are setting money aside for those expenses throughout the year;
- It helps reduce the taxes you pay.
- Who is eligible
- Eligible dependents
- Eligible daycare expenses
- When coverage starts
- When coverage ends
- Use it or lose it
- Claim Filing Procedure
- Online claims information
To participate in this plan, you must enroll online:
- within 30 days of hire into an eligible position;
- within 30 days of a qualified status change that changes your need for day care like adding or losing a dependent, marrying or divorcing; or
- during the annual open enrollment period.
Who is eligible
To be eligible to be reimbursed from the DCAP, you must be:
- single and working;
- divorced or legally separated and have custody of your child, even if your former spouse claims the child for income tax purposes; or
- married and:
- both you and your spouse work or are looking for work; or
- your spouse is a full-time student for at least five months of the year; or
- your spouse is mentally or physically disabled and unable to care for your eligible dependent(s).
Eligible dependents include only those whom you can claim as an exemption on your Federal Income Tax return, who live with you for more than one-half of the year, and who meet the following criteria:
- Dependents under age 13 (at the time care is provided) whom you claim as an exemption on your Federal Income Tax return;
- Your spouse who is physically or mentally unable to care for himself/herself, whom you also claim as an exemption or,
- Your dependent who was physically or mentally unable to care for himself/herself, whom the taxpayer would have claimed as a Federal Income Tax exemption were it not for the person having $3,900** or more of gross income.
**The amount shown is for 2013—subject to change each tax year.
If I Enroll in the DCAP, does this eliminate my ability to take the IRS Child/Dependent Tax Credit?
Expenses over and above the DCAP maximum contribution limits may or may not qualify for the IRS tax credit. This is covered under "Dollar Limit" in IRS Publication 503 and on IRS Form 2441 (Child and Dependent Care Expenses). The Division of Retirement and Benefits does not give tax advice. It is your responsibility to contact a tax advisor as necessary for your particular situation.
Will this program give me a bigger tax break than the federal tax credit?
This usually varies for each person. You should fill IRS Form 2441 (Child and Dependent Care Expenses) to see which would benefit you more (use IRS Publication 503 as a guide). The Division of Retirement and Benefits does not give tax advice. It is your responsibility to contact a tax advisor as necessary for your particular situation.
How does the plan work?
When you are enrolled in the Dependent Care Assistance Plan (DCAP), half of your monthly contribution amount is deducted pre-tax, from each of two paychecks. This deduction reduces your taxable income. A DCAP reimbursement account is established in your name once your full month’s contribution has been received. After you receive a receipt, statement or billing for your dependent daycare services, you may request reimbursement from your account. The care provider’s signature must either be present on the claim form or on an attached invoice; or original backup must be provided if no provider signature is available. You will receive a payment for your monthly expenses or the amount in your account, whichever is less.
Eligible daycare expenses
The IRS considers dependent care expenses eligible for reimbursement if they are for qualifying care of eligible dependents and the care allows an employee (and their spouse if married) to work, look for work or attend school full-time. Care may be:
- in home or in a day care facility;
- before or after school care;
- specialty camp if it is serving as day care and is not overnight
The section "Expenses Not for Care" in IRS Publication 503 provides specific information on what types of expenses are not eligible for reimbursement.
You select the amount of your monthly contribution. The minimum is $25/month and the maximum is $416/month. The maximum yearly contribution is based on the following criteria:
|Filing Status||Max. Yearly Contribution|
|Single or married and filing a joint return||$5,000|
|Married and filing separate returns||$2,500|
|Married and your spouse earns less than $5,000||Your spouse’s annual salary|
Married, filing a joint return and
spouse is a student or disabled
$2,400 for one dependent
$4,800 for two dependents
Contributions are split and deducted, pre-tax, from each of your first two paychecks in the month.
When Coverage Starts
Coverage starts on the latest of:
- The first of the month following 30 days of employment if elected when first hired;
- The first of the month following enrollment after a qualified status change;
- January 1 if enrolling during Open Enrollment; or
- The first of the month following your return to work from leave without pay.
When Coverage Ends
Coverage ends on the earliest of:
- The last day of the month in which you are in pay status or terminate employment; or
- The last day of the benefit year, December 31, if you do not re-enroll for the following benefit year.
Re-enrollment is required for DCAP during each Open Enrollment.
Use It or Lose It
You forfeit any money left in your DCAP after the end of the Benefit Year. You may not receive a refund or carry the money over to the next benefit year.
This is required by the Internal Revenue Service (IRS) and very specific IRS tax rules apply. These tax rules are found in IRS Publication 503 and IRS Form 2441. DCAP rules are derived from Internal Revenue Code (IRC) Section 129 and include many of the definitions and rules from Dependent Care Tax Credit IRC 21. The Alaska Division of Retirement and Benefits recommends carefully planning your expenses and visiting irs.gov to review Publication 503 and Form 2441 and the instructions prior to enrolling in the Dependent Care Assistance Plan. DCAP participants must complete IRS Form 2441 as a part of their Federal Tax returns.
Claim Filing Procedure
You may file a claim online by logging into your PayFlex account, or if you an AlaskaCare member, through Aetna Navigator. Or you may complete and submit a Request for Reimbursement form along with an itemized invoice* from your provider. The invoice must contain the following information:
- Provider’s name, address and Tax Identification Number (TIN) or Social Security Number (SSN). The TIN or SSN is especially important because you will have to provide the information when you file your tax return. If you don’t, the amount you were reimbursed for that provider’s services will be taxable.
- Name of the dependent who received the care and his or her relationship to you
- Period covered and charges
*The Request for Reimbursement form has a section which can be used in place of a separate invoice.
Claims over $25 will be reimbursed up to the amount of your request. If there isn’t enough money in your account to pay the full amount, you’ll be reimbursed up to your account balance. The remainder will be paid later, after there is a sufficient balance.
Online Claims Information
Create an account and view the status of your DCAP claims. Once you log in, you have access to:
- Balance information
- Account statements
- Deposit history records
- Claims history
Contact Aetna concierge at (855) 784-8646 with questions.