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Dependent Care Flexible Spending Account

Overview

The Dependent Care Flexible Spending Account (DFSA) allows faculty and staff to set aside money pretax to pay for childcare expenses for dependent children 12 years and under. Depending on household income, employees may find it advantageous to claim childcare expenses on their federal income tax return instead of electing a DFSA. The IRS does not allow individuals to claim the expenses on a tax return if using a DFSA. Consult with a tax advisor about which option is best.

Features

  • Not subject to federal tax
  • Reimbursement for expenses limited to the amount available in one’s account
  • Eligible expenses include day care, a private nanny, preschool or nursery school, before and after school programs, and summer day camps

Rules

  • Participants may contribute between $100 and $5,000 into the account or $2,500 for participants who are married and filing a separate tax return.  
  • The IRS holds participants responsible for ensuring that their contributions and their spouse’s contributions do not exceed $5,000 in a tax year.
  • The account may be used to pay for eligible expenses for children 12 years and under and for any spouse or relative living with the participant who is physically and mentally unable to care for oneself and for whom the participant can claim as a dependent as defined by the IRS.
  • If a participant’s child turns 13 during the plan year, employees may no longer use the DFSA, unless the child is physically or mentally incapable of self-care. A child turning 13 is a qualifying event and a reason to terminate participation in the plan.
  • In order to be eligible for reimbursement, expenses must be incurred during the calendar year while the participant is contributing to the plan. If the participant’s employment terminates, expenses incurred after the termination date are not eligible for reimbursement.
  • The IRS does not allow participants to roll over unused funds at the end of the year; any money remaining in the account at the end of the year is forfeited.
  • Generally, the IRS requires that both the participant and spouse work to qualify to contribute to the DFSA, although there are specific exceptions.
  • The DFSA is not a plan to cover dependents’ health related expenses; these expenses may be eligible under the Healthcare Flexible Spending Account.
  • Participants must report to the IRS on their tax return the name, address, and Social Security number (or other taxpayer identification number) of any dependent care service provider during the relevant calendar year.

Eligibility

All benefits-eligible employees with the exception of visiting fellows may elect this plan. For postdoctoral research fellows, pretax deductions can only be taken from the wage supplement.

Deadlines and Application Process

  • Faculty and staff may elect this benefit within 31 days of hire date, during the Annual Open Enrollment period, or if there is a qualifying life event.
  • Participants have until March 31 each year to submit claims for eligible expenses incurred during the prior calendar year.
  • To continue contributing to the DFSA from one calendar year to the next, a new election must be made during the Annual Benefit Open Enrollment; elections will not carry over from year-to-year.

How to be reimbursed

  • File claims online on Payflex website or submit a claim form by fax. A receipt from the childcare provider is required. Participants can only receive reimbursement based on how much is being withheld from their paychecks and available in the account at the time of the claim.
  • To set up an account with Payflex, participants need to provide their Princeton benefits ID number located in HR Self Service under Benefit Details. 
  • Participants can arrange for direct deposit of their reimbursements through Payflex website.

 

If there are any discrepancies between the information in this publication, verbal representations, and the plan documents, the plan documents always govern. Although Princeton intends to continue these benefits, the University reserves the right to amend or terminate these plans at any time.