Dependent Care Flexible Spending Accounts, or Dependent Care FSAs, help military families pay for eligible dependent care expenses, including the costs associated with nursery school, preschool, and summer camp, while parents work or attend school. These accounts are intended to reduce the financial burden of dependent care that is placed on parents while they are engaged in employment- or education-related activities.
Who is eligible for a Dependent Care FSA?
Dependent Care FSAs are available to active duty servicemembers, members of the active Reserve on Title X orders, and civilian employees of the Department of Defense.
Further, eligible caregivers must have qualifying dependents who are listed as dependents for tax-filing purposes. These include:
- Child(ren) under age 13
- Dependent(s), including spouses, who are mentally or physically incapable of self-care
How much can be contributed to an account?
Dependent care FSAs are pre-tax accounts that are funded by automatic paycheck deposits. When account owners contribute to their accounts, they lower their taxable income by the contribution amount and therefore reduce their annual tax burden. Eligible account owners can contribute between $100 and $5,000 per year (or $2,500 if their tax status is married, filing separately).
The Department of Defense does not match any contributed funds.
While the Office of Personnel Management charges an administrative fee for each FSA beneficiary, servicemembers are not charged this fee. It is paid for by their branch of service.
Note: If there are two eligible adults in a family (e.g., two active duty servicemembers, or one active duty servicemember and one Department of Defense civilian employee), the total contribution to FSA accounts cannot exceed $5,000 per year. Excess contributions may result in tax penalties.
What services are available for reimbursement?
The purpose of a Dependent Care FSA is to help pay for services that are used while an eligible account owner and/or their spouse works, looks for work, or attends school full time.
Funds contributed to an FSA can pay for eligible dependent care services, including:
- Nursery school and preschool
- Daycare and adult day care
- Babysitting and nannying expenses incurred while caregivers are engaged in employment- or education-related activities
- Summer camp
- Before and after school programs
FSA funds cannot be applied toward elementary school tuition beginning in kindergarten, services that are provided by another dependent in the family (e.g., paying an older sibling to babysit a younger one), nighttime babysitting (unless a caregiver is working nights or attending night school), overnight or sleepaway camp, or care provided at a nursing home or residential care facility.
How to Enroll in a Dependent Care FSA
Eligible individuals can open an FSA during the annual open enrollment period (which typically lasts from mid-November through mid-December each year) or within 30 days of experiencing a qualifying life event.
Qualifying life events include marriage and divorce, the birth or adoption of a child, and the death of a household member. For eligible servicemembers, a permanent change of station is considered a qualifying life event.
Before opening a Dependent Care FSA, it may be wise to consult a financial professional or tax consultant – there are tax implications to owning an FSA. Our accredited Educators can also help you determine whether this option is right for your family.
Using Dependent Care FSA Funds
Funds contained within an FSA are “use or lose” – meaning that any funds that are not spent on eligible services during the benefit year are forfeited at year-end. For this reason, account owners should be strategic when depositing funds into their accounts to prevent funding the account with more money than will be spent on eligible expenses during the benefit period.
Unlike with pre-tax medical accounts, Dependent Care FSA owners do not receive a debit card for eligible purchases. All expenses must be filed as claims; reimbursement will be provided after verification of eligibility. Account owners must submit reimbursement claims by April 30 of each year for the benefit period of January 1 (of the year prior) through March 15 (of the current year).
Account owners are required to submit supporting documentation of their expenses when filing claims for reimbursement. The care provider (babysitter, preschool administrator, etc.) may need to sign the claim form or provide an itemized receipt for services provided. Account owners can submit claims via the FSAFEDS mobile application, online, or via mail or fax, and receive reimbursement via check or direct deposit.
Navy Mutual’s accredited financial counselors can help servicemembers and their loved ones understand the benefits that are available to them. If you have questions about Dependent Care FSAs or other Department of Defense or VA Benefits, they can be reached at 888-298-4442.