What exactly is dependent care reimbursement?

Question

I just got hired with Check Advance/ Value Services as a CSR. They offer this with my benefits package. What exactly is dependent care reimbursement?

Answer 1

A Dependent Care Reimbursement Account allows you to set aside part of your salary each pay period on a pre-tax basis to reimburse eligible expenses incurred for the care of your child, disabled spouse, elderly parent, or other dependent who is physically or mentally incapable of self-care, so that you (and your spouse) can work or actively look for work. Otherwise you can contact with the concern department to have brief knowledge on this.

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Answer 2

What is a Dependent Care Reimbursement Account?

A Dependent Care Reimbursement Account allows you to set aside part of your salary each pay period on a pre-tax basis to reimburse eligible expenses incurred for the care of your child, disabled spouse, elderly parent, or other dependent who is physically or mentally incapable of self-care, so that you (and your spouse) can work or actively look for work.

Flexible Reimbursement Account (FRA) vs. Child Care Tax Credit

A Flexible Reimbursement Account may save you more in taxes than the Child Care Tax Credit, but it depends on your income. If you expect your adjusted gross family income to exceed $24,000 and you are not in the 15% tax bracket, the Dependent Care Flexible Reimbursement Account (FRA) will generally benefit you more, but consult with your personal tax advisor.

Eligible Dependents

Children 12 years and under who reside in your household

Adults/children mentally or physically incapable of self-care who spend at least 8 hours a day in your household.

Your Dependent Care FRA may be used to reimburse eligible dependent care expenses incurred during the plan year for qualifying individuals. See pages 10 and 11 of the Flexible Benefits Sourcebook.

Expenses

Eligible Expenses

Expenses for child and elder care cost that allow you and your spouse to work or actively look for work are eligible for reimbursement.

Examples are:

Day care facility fees for qualified dependents

Local day camp fees for qualified dependents

Baby-sitting fees for at-home care of qualified dependents while you and your spouse are working (care cannot be provided by you, your spouse, or other dependent).

Ineligible Expenses

Child support payments or child care if you are a non-custodial parent

Payments for dependent care services provided by your dependent, your

spouse's dependent, or your child who is under age 19

Healthcare costs or educational tuition

Overnight care for your dependents (unless it allows you and your spouse to

work during that time)

Nursing home fees

Diaper service

Books and supplies

Activity fees

Kindergarten expenses

Reimbursement Account Rules

Because spending accounts offer tax advantages, the IRS places certain restrictions on these accounts.

You cannot transfer money between accounts.

You cannot change the annual amounts without a qualifying mid-year event (see Making Changes Outside of Annual Enrollment)

You must use the full amount in the account each plan year, or lose it. The "use it or lose it" rule means if you don’t use all of the money in your account, you cannot get a refund or roll it over into the next plan year. For this reason, it’s important that you set up your annual Flexible Reimbursement Accounts only for predictable expenses to be incurred during the plan year.

Who is Eligible to Participate?

Each employee eligible for the State Health Benefits Program may participate in the Dependent Care Reimbursement Account.

How A Reimbursement Account Works

First, estimate how much money you’ll spend from during the plan year for expenses which qualify for reimbursement. Your contribution to the account must be within the minimum and maximum amounts allowed for each account.

Once you’ve enrolled in an account, each pay period the amount you allocate to your Reimbursement Account is taken out of your pay before taxes are calculated and withheld. The money you set aside for your account is tax-free.

During the plan year, when you pay for eligible expenses, you will be reimbursed for them with the tax-free money you have set aside in your Reimbursement Account by simply filing a Reimbursement Request Form with the supporting documentation.

With a Dependent Care FRA, you may not be reimbursed for amounts greater than your total deposits made at the time of your claim.

Each year you must re-enroll in the account, even if you wish your total annual contribution for the new plan year to remain the same.

Answer 3

Ask your H.R. dept.

Answer 4

Money is taken out of your check pre-tax for reimbursement of dependent care (daycare) expenses you incur if you elect. Since it is taken out before taxes this reduces your taxable income which is generally a good thing. Since dependent care is also available as a tax credit, the dependent care plan may not be the best of the two for you; but it may, that is if you have dependent care expenses. I would also ask your HR department to give an explanation as they usually have brochures that show how it works and explain whether the reimbursement or the tax credit makes more sense for you.