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Health & Welfare: Dependent Care Flexible Spending Account (DCFSA)
Enrolling in a Dependent Care Flexible Spending Account (DCFSA) can save you money! A DCFSA offers eligible employees the opportunity to reduce their taxable income on eligible dependent care expenses. Contributions to this account can be taken out of your salary before Social Security and Medicare tax, federal income tax and, in most cases, state and local income taxes are calculated.
To use a Dependent Care Flexible Spending Account, you, your dependent, your care provider and the expenses must qualify under Internal Revenue Service (IRS) rules:
- Your expenses must be for the care of Qualifying Individuals:
- Your qualifying child through age 12 (expenses for care incurred on or after the child's 13th birthday are not eligible) who lives with you more than half of the year and has not provided over half of his/her own support, or
- Your dependent or spouse who is physically or mentally incapable of caring for himself or herself who regularly spends at least eight (8) hours per day and more than one-half (1/2) of the year in your home.
- Your child and dependent care expenses must be eligible employment-related expenses incurred to allow you and your spouse, if you are married, to work:
- If you are divorced or separated, you must be the custodial parent to participate. (The custodial parent is the parent with whom the child shares a residence for the greater portion of the year.)
- You must pay someone other than your spouse, your child under age 19, a parent of the child, or a person you or your spouse can claim as a dependent.
- Your reimbursements cannot exceed certain limits.
- You must submit claim forms with the care provider's signature.
- Form 2441 must be completed with your federal income tax return (not a requirement for Plan participation).
Eligible Expense Requirement
Employees work for State Farm Insurance Companies. In the case of your spouse, work can be for others, full time or part time or in the spouse's own business or partnership. Unpaid volunteer work does not qualify.
If you are married, both you and your spouse must work, or be in active search of work. If your spouse does not work, your spouse is treated as working and earning income if he or she was a full-time student during each of five months during the tax year, or he or she was physically or mentally not able to care for himself or herself.
The maximum amount of expenses that can be claimed under a dependent care assistance plan is $5,000 per year if you are unmarried or are married and file a joint federal income tax return. If you are married and file separate income tax returns, your limit is $2,500 per year. However, in either situation, the limit may not exceed your earned income or, if you are married, your or your spouse's earned income.
If you are married and, for any month, your spouse is either a full-time student (for five months of the Plan Year) or not able to care for himself or herself, your spouse will be considered to have earned income of $250 for such month if there is one qualifying individual in your home, or $500 for such month if there are two or more qualifying individuals in your home.
All DCFSA claims must be submitted to the Benefits Administrator within three months of the end of the plan year (or by March 31) to be eligible for reimbursement.
Estimate your expected expenses from your enrollment date through December 31 of the plan year carefully! If you contribute more money to your DCFSA than the amount of eligible day care expenses you receive, you will forfeit that amount. To be eligible for DCFSA reimbursements, you must receive the dependent care services after your enrollment date and before the end of the plan year, regardless of when you are billed or pay for services. For new employees, your enrollment effective date will be the first of the month following your hire date.
If you are interested in participating in a Dependent Care Flexible Spending Account, be sure to submit your enrollment within 31 days of your hire date or during the next Annual Enrollment period. For new employees, your enrollment effective date will be the first of the month following your hire date.
Allocations to a DCFSA may only be changed (prospectively) during the year if you meet the qualifying event rules and applicable consistency rules. These rules are extremely specific, so be sure to consult the Dependent Care Flexible Spending Account Plan for U.S. Employees Summary Plan Description.
Employees may also be eligible for the dependent care tax credit. Please refer to the DCFSA Summary Plan Description or check with your tax consultant to determine which program — the dependent care tax credit or the DCFSA — makes the most sense for you.
State Farm encourages you to review your benefit options carefully and make informed decisions.
This brief overview of the State Farm Dependent Care Flexible Spending Account (DCFSA) Plan is not intended to be a complete explanation of plan features. For more detailed information, please refer to the Dependent Care Flexible Spending Account Plan for U.S. Employees Summary Plan Description.