Also known as a flexible spending arrangement, a Dependent Care Flexible Spending Accoutn (DCFSA) is a type of tax-advantaged savings account where you can set aside pre-tax dollars to pay for qualifying dependent care expenses. This account is post-funded, meaning that funds are only available to an employee once deductions are made through payroll.
Pre-tax deductions are taken from the employee’s payroll throughout the year and those deductions will be available that same day.
If your Dependent Care FSA is managed by Gusto, visit your Gusto Benefits Card Manager portal to see your balance and submit claims.
Note for employers: in order to offer a DCFSA through Gusto, you must offer medical insurance through Gusto.
Dependent Care Flexible Spending Arrangements (includes limited-purpose FSAs) Filing Status
Married and filing jointly
Married and filing separately
Dependent Care FSA funds can be used on care for qualified dependents that assist an employee in working or looking for work.
For a comprehensive list of eligible expenses in addition to what makes a dependent “qualified” See IRS Publication 503
Examples of eligible expenses:
After-school care, preschool, day care, or babysitters for children under 13 are typically eligible expenses
Care for an adult dependent that meets the criteria of qualified dependent
Examples of ineligible expenses:
A babysitter while the parent goes to dinner
Tuition for schooling Kindergarten and above
Meal fees, late fees, or anything not directly related to care
Any employee eligible to participate in health benefits with your company is eligible to participate in the Dependent Care FSA.
Owners taking owner’s draws and 2% or greater shareholders of an S Corporation are not eligible to participate in Dependent Care FSA benefits.
If you offer a DCFSA through a third party, you can set up payroll deductions for your enrolled employees.
The increased dependent care FSA contribution limits under the American Rescue Plan Act of 2021 (ARPA) is an optional increase for employers that offer a dependent care FSA.
The ARPA increased the dependent care FSA contribution limits from $5000 to $10,500 for the calendar year 2021. Read more about the new law that’s bringing important changes to FSA rules.
If you have a dependent care FSA with Gusto, we’re unable to support the limit increases at this time. This means employees cannot increase their election amounts for the remainder of 2021 if your DCFSA is managed by Gusto.
Learn more about Gusto dependent care FSAs.
If your employer is offering a Dependent Care Flexible Spending Account (FSA) to you, you may enroll in that plan from your Gusto account. Follow the steps below to enroll or waive coverage:
The annual amount chosen during your enrollment is locked in for the remainder of the company’s policy year. Dependent Care FSA amount cannot be changed unless you experience a valid qualifying life event, like a change in day care needs. Learn more about QLEs here.
If you are experiencing a qualifying life event and believe that you are eligible to make changes to your Dependent Care FSA election please reach out [email protected] for assistance.
If you want to change your contribution, you can only lower it to the amount that you've already contributed.
Dependent Care FSAs will be terminated on the last day of employment.
Runout period: An employee will have 90 days from the last day of employment to submit claims for any eligible services rendered prior to the last day of employment, but after the effective date of the Dependent Care FSA.
You can see your last day to submit claims in your Gusto Benefits Card Manager, by clicking into your Dependent Care FSA and looking at the “Deadlines” Section.
If you didn’t register for your Gusto Benefits Card Manager account during your employment, please reach out to [email protected] for your credentials.
After the 90 day runout period any remaining funds left in your account will be forfeited to your previous employer.