DCAP: Tax savings for child and elder care

The dependent care assistance program (DCAP) helps you pay for child care and elder care by allowing you to set aside a portion of your salary for eligible expenses. The money you set aside isn’t taxed, so you save money on eligible expenses for services like preschool, day care, nanny fees, care for a person who is disabled, and other similar services. The exception to this is when your earnings are from an after tax source, such as a stipend. In that case your DCAP deductions will be made on an after tax basis, not a pre-tax basis.

You choose how much of your salary goes into your DCAP fund, up to $5,000. Choose your contribution amount carefully. DCAP funds are “use it or lose it” funds, and you must spend your entire yearly allotment before December 31 — or you’ll forfeit unused funds.

Enroll or re-enroll in DCAP

Enrollment is effective for one tax year only and does not automatically renew. To continue DCAP, you must re-enroll each year during open enrollment. The DCAP accounts for UW employees are managed by Navia Benefits Solutions, a local company that administers benefits for organizations.

Eligibility

You’re eligible to enroll in DCAP as long as you’re eligible for PEBB benefits. However, if you have a stay-at-home spouse, you should not enroll in DCAP. You also can’t enroll if you are a student whose wages are exempt from Social Security and Medicare or if you receive no income from a U.S.-based source.

When you can enroll

You may enroll in DCAP at the following times:

During your first 31 days of employment
During your first 31 days of becoming eligible for PEBB benefits
During annual open enrollment, from November 1 – 30
Within 60 days of a qualifying life event, such as a marriage or birth

If you enroll during the open enrollment period, your DCAP payroll deductions begin on the first paycheck following January 1. You can request reimbursement of funds as soon as they are deposited into your account provided your eligible expenses have occurred in that same calendar year.

If you enroll due to a qualifying life event, your participation in the plan begins on the first day of the following month. Your payroll deductions begin in one to two pay periods, and the funds are available as soon as they are deposited into your DCAP account.

How to enroll

View the FSA and DCAP Enrollment Guide and enroll through Workday. Contact UW Benefits if you have questions.

Re-enroll in DCAP each year

DCAP doesn’t continue automatically. View the Open Enrollment User Guide and re-enroll through Workday each year during open enrollment, November 1 – 30.

How DCAP works

While DCAP may not cover your entire child care or elder care costs, it does give you a helpful payment option that can reduce your federal tax obligation. The money deducted from your paycheck and put into your DCAP fund isn’t taxed — you don’t pay Social Security, Medicare, or federal taxes on that money. If your earnings are from an after tax source, such as a stipend, then your DCAP deductions will be made on an after tax basis, not a pre-tax basis.

This makes the cost of care cheaper. Many types of child care are eligible including babysitting, au pair services, after school care, day camps, care by a relative, and others. Elder care costs and services for people who are disabled are also eligible.

But before enrolling in DCAP, you need to accurately estimate your care costs. The maximum amount you can set aside in 2022 is $5,000 for those filing as married filing jointly or as single, and $2,500 if filing as married filing separately. Since care costs are usually expensive, you may have no trouble spending your entire DCAP amount each year. However, you don’t want to have any money left over at the end of the year because you’re required to forfeit any unspent funds. Once you enroll, you can’t change your deduction amount until next year (unless you experience a qualifying life event).

Once you know your DCAP amount for the year, you’re ready to enroll. The amount you elect will be deducted from your paycheck in equal increments throughout the calendar year.

What dependents qualify?

A qualifying dependent child must live with you and be 12 years old or younger. Children 13 and older only qualify if they are physically or mentally incapable of caring for themselves and if they regularly spend at least eight hours each day in your household.

Spouses who can’t care for themselves also qualify, as do any other dependent who is physically or mentally incapable of self care.

Any qualified dependent must be recognized by the Internal Revenue Service (IRS) as a dependent. Contact Navia Benefit Solutions if you have questions about qualified dependents.

Using your DCAP account

You can begin submitting reimbursement claims for eligible expenses on or after the first day of the plan year, January 1. You can only be reimbursed up to the dollar amount you have in your DCAP account at the time you request reimbursement. You may submit claims for services as often as you like, but not until after the services have been provided.

Eligible medical expenses

DCAP funds can cover both child care expenses and elder care expenses. To learn which specific types of expenses are eligible and which are not eligible, see the list of eligible and ineligible DCAP expenses.

Submit a claim for reimbursement

Once you incur expenses, you have several options for submitting a reimbursement claim. Claims are processed by Navia, and you can submit a claim through your online profile, using the MyNavia mobile app, by sending an email, or by mailing a completed claim form.

If you have other questions about how claims work, see Navia frequently asked questions or contact Navia directly.

Deadline for spending DCAP funds

Each year you must use all your DCAP funds. Otherwise, you’ll lose your money. Any services that you want to pay for using DCAP funds must occur by December 31. You have until March 31 of the following year to submit all claims for reimbursement.

Qualifying life events for changes or special enrollment

During annual open enrollment, any eligible employee can enroll or re-enroll in DCAP and change their DCAP amount for the forthcoming year. To make changes during other times of the year or to enroll during other times of the year, you must experience a qualifying life event.

Once the event occurs, you have 60 days to make a change or enroll. Events that qualify include:

Marriage or domestic partner registration
Birth or adoption
Change in employment status
Change in dependent care provider cost
Legal custody or guardianship of a child
Disability of a child

If you’re unsure whether or not an event qualifies, contact UW Benefits. Events that qualify are defined by the state in the Washington Administrative Code 182-08-199.