Dependent Care FSA
The Dependent Care Flexible Spending Account (DCFSA), administered by HealthEquity, provides you with a way to pay for eligible dependent care expenses with pre-tax dollars. See below for important information on the IRS "use it or lose it" rule.
A DCFSA may be used for eligible dependent care (day care, elder care) expenses incurred so that you may work. If you are married, your spouse must also work or go to school full time for at least five months within a calendar year (the months do not need to be consecutive while you are at work to qualify for this plan).
Your dependent care expenses must be for the care of one or more qualified dependent(s) but not for dependent health care expenses. Qualified dependent(s) for a dependent care FSA may include:
- Your child(ren) under age 13
- Dependents of any age who are mentally or physically incapable of caring for themselves, and whom you claim as a dependent on your federal income tax return
IRS "Use it or Lose it" Rule
Dependent Care FSAs are subject to an IRS “use it or lose it” rule that requires unused DCFSA balances at the end of a plan year to be forfeited.
Important Notes on Dependent Care FSAs, including Contribution Caps:
- The Dependent Care Flexible Spending Account (DCFSA) offered to employees by New York University is subject to requirements imposed by §129 of the Internal Revenue Code (Code). In order for NYU to provide our employees with the tax advantaged benefits offered under the program, the DCFSA must not discriminate in favor of “highly compensated employees” (as defined under the Code), either in terms of eligibility to participate, contributions, or benefits under the program.
- In accordance with our plan’s requirements and procedures, we have determined that a cap limiting the maximum election amount allowed for highly compensated employees is required in order for the plan to continue to qualify to provide tax advantaged benefits. Therefore, highly compensated employees’ pre-tax DCFSA contributions will be capped at $2,400 for the 2023 plan year.
- You are classified as a highly compensated employee as defined by the IRS if your total compensation is equal to or exceeds $135,000.
- You cannot use the Dependent Care FSA to reimburse for health care expenses incurred by a dependent.
- If you are married, IRS regulations may impact how much you can deposit:
- If your spouse has a Dependent Care FSA through your spouse's employer and you file a joint tax return your combined deposits cannot exceed $5,000.
- If you are married and file separate tax returns the most you can contribute is $2,500.
- In order to contribute to a Dependent Care FSA, you must enroll within 31 days of your date of hire.
- To continue the DCFSA in subsequent years, you must actively enroll each year during the Annual Enrollment period.