Navigating the costs of dependent care can be a significant financial challenge for many families. If you’re seeking ways to manage these expenses while ensuring quality care for your loved ones, you might be wondering, what is a dependent care assistance program? This guide will walk you through the essentials of a Dependent Care Assistance Program (DCAP), specifically tailored for Public Employees Benefits Board (PEBB) benefits-eligible employees.
DCAP Eligibility: Are You Qualified?
The Dependent Care Assistance Program (DCAP) is exclusively available to PEBB benefits-eligible employees working within specific sectors. Eligibility is tied to your employer type, not your chosen medical plan. You can enroll in DCAP regardless of your medical plan selection.
You are eligible for DCAP if you are a PEBB benefits-eligible employee working at:
- State agencies
- Higher education institutions
- Community or technical colleges
Important Note: Employees of cities, counties, port authorities, tribal governments, water districts, hospitals, and similar entities are not eligible for DCAP benefits. It’s crucial to confirm your employer type to determine your eligibility.
Understanding the Benefits: How DCAP Can Help Your Family
Childcare and elder care expenses often represent a substantial portion of a family’s budget. The DCAP is designed to alleviate this financial strain by allowing you to allocate pre-tax funds from your paycheck to cover eligible dependent care costs. This means you set aside money before taxes are deducted, effectively reducing your taxable income.
Key benefits of participating in DCAP include:
- Pre-tax Savings: By contributing to a DCAP, you lower your annual taxable income. Your elected contribution is deducted from each paycheck before taxes are calculated.
- Tax Advantages: You avoid paying FICA taxes (7.65%) and federal income tax (up to 37%) on the money you contribute to your DCAP. This can lead to significant tax savings over the plan year.
- Coverage for Eligible Expenses: DCAP funds can be used for a range of dependent care services that enable you (and your spouse or state-registered domestic partner, if applicable) to work, attend school full-time, or actively seek employment. Eligible expenses include:
- Elder day care
- Babysitting services
- Day care facilities
- Preschool programs
- Registration fees associated with eligible care
Qualifying Dependents: Who Can Be Covered?
To utilize DCAP funds, the care must be for a “qualifying dependent.” The IRS defines a qualifying dependent for dependent care benefits as someone who meets specific criteria:
- Children Age 12 or Younger: Your child must be 12 years old or younger and reside with you.
- Incapacitated Dependents Age 13 or Older: A dependent aged 13 or older who is physically or mentally incapable of self-care and spends at least eight hours each day in your household also qualifies. This could include elderly parents or other adult dependents.
For deeper insights into maximizing your benefits and understanding related healthcare savings options, consider listening to the Fund Your Future DRS podcast episode on saving healthcare costs with FSA and DCAP.
Enrollment in DCAP: Getting Started
Enrolling in DCAP is typically straightforward, but the process can vary slightly depending on your employer.
Key Enrollment Periods:
- Open Enrollment: The most common time to enroll is during your employer’s annual open enrollment period. This is when you can make changes to most of your benefits for the upcoming plan year.
- Initial Eligibility: You can also enroll when you first become eligible for PEBB benefits as a new employee.
- Special Open Enrollment Events: Certain life events, such as the birth or adoption of a child, marriage, or divorce, may trigger a special open enrollment period, allowing you to enroll in or modify your DCAP election.
Enrollment Methods:
- Standard Enrollment: For most eligible employees, enrollment is managed through the standard PEBB benefits enrollment system.
- University of Washington (UW) and Washington State University (WSU) Employees: Employees of UW and WSU must enroll through their respective Workday platforms.
Important Reminders:
- Annual Enrollment Required: DCAP enrollment does not automatically renew each year. You must actively choose to enroll in DCAP every plan year you wish to participate.
- Enroll Each Year: To continue receiving DCAP benefits, remember to re-enroll during open enrollment each year.
Contribution Amounts: How Much Can You Set Aside?
The DCAP offers flexibility in contribution amounts, allowing you to tailor your election to your estimated dependent care expenses.
Contribution Limits:
- Minimum Contribution: The minimum annual contribution to DCAP is $120.
- Maximum Contribution: IRS regulations set annual maximum contribution limits:
- $5,000 annually for single individuals or married couples filing jointly.
- $2,500 annually for married individuals filing separately.
Tax Savings Calculator: To estimate your potential tax savings based on different contribution levels, Navia Benefit Solutions provides a helpful Tax Savings Calculator. This tool can assist you in determining the optimal contribution amount for your situation.
Election Changes: Generally, you cannot change your elected contribution amount after the plan year begins. However, you can make changes if you experience a qualifying life event that aligns with the requested change (e.g., changes in dependent care needs due to birth, adoption, marriage, or divorce).
Submitting Claims: Accessing Your DCAP Funds
Once you incur eligible dependent care expenses, you can easily access your DCAP funds by submitting a claim for reimbursement. Navia Benefit Solutions provides multiple convenient methods for claim submission:
Claim Submission Options:
- Online Portal: Submit claims and manage your account through the Navia Benefit Solutions website (http://pebb.naviabenefits.com/).
- Navia Benefits Debit Card: Use your Navia Benefits Debit Card to pay for eligible expenses directly at participating providers.
- Mobile App: Utilize the Navia mobile app, available for iPhone and Android, to submit claims and manage your account on the go.
- Email: Send your claim documentation to [email protected].
- Fax: Fax your claim forms to 425-451-7002 or toll-free at 1-866-535-9227.
- Mail: Send claims via mail to: Navia Benefit Solutions, PO Box 53250, Bellevue, WA 98015-3250.
Important Claim Information:
- Reimbursement Timing: You can submit claims for eligible expenses as soon as the plan year starts (January 1).
- Reimbursement Limit: Reimbursement is limited to the amount currently available in your DCAP account at the time of your request.
- Service Dates: Services must be provided before you can submit a claim for reimbursement.
Spending Deadline and Fund Forfeiture
It’s crucial to be aware of the deadlines associated with your DCAP funds to avoid forfeiting any unspent contributions.
Key Deadlines:
- Expense Incurrence Deadline: Eligible dependent care expenses must be incurred by December 31 of each plan year.
- Claim Submission Deadline: You must submit all claims for reimbursement to Navia Benefit Solutions by March 31 of the following year.
- Account Closure: Your DCAP account will close on March 31 of the following year unless you re-enroll for the subsequent plan year.
Fund Forfeiture: Any funds remaining in your DCAP account after the March 31 claim deadline, if you did not re-enroll for the following year, will be forfeited to the Health Care Authority according to IRS regulations. Once forfeited, these funds cannot be reclaimed. Plan your contributions and spending carefully to maximize your benefit.
DCAP Funds After Coverage Ends
If you leave your employment and have unspent DCAP funds, you can still access these funds under certain conditions.
Post-Employment Claims:
- Claims Run-Out Period: You can continue to submit claims for eligible expenses incurred through December 31 of the plan year, even after your employment terminates, until the March 31 claims run-out deadline.
- Eligibility Requirement: The expenses must have allowed you (or your spouse/domestic partner) to work, attend school full-time, or look for work during the period the expenses were incurred.
- Reimbursement Limit: Claims are limited to your remaining account balance.
- No Expense Incurrence After December 31: You cannot incur new eligible expenses after December 31 of the plan year if you are no longer employed and expect them to be reimbursed from your DCAP.
- No Continuation Coverage: There are no COBRA-like continuation coverage rights for DCAP.
For detailed information about coverage termination and fund access, consult the DCAP Enrollment Guide on Navia’s website or contact Navia customer service directly at 1-800-669-3539 or via email at [email protected].
Understanding what is a dependent care assistance program and how it works is the first step towards leveraging this valuable benefit. By carefully planning your contributions and staying informed about deadlines and eligibility rules, you can effectively manage your dependent care expenses and maximize your tax savings through the DCAP.
