How to Get the Most Out of Your FSA and DCAP

1 out of 3 participants do not know that a Flexible Spending Account (FSA) and a Dependent Care Assistance Plan (DCAP) require a separate election.  Both benefit strategies provide pre-tax dollars to spend on the things that mean the most in life – our health and our children, but do completely different things.

Most people don’t know what account does what with employees incorrectly believing a DCAP is used to pay for a dependent’s medical expenses.  Check out below what both pre-tax benefit strategies do and how to get the most out of them.

The BASE® Flexible Spending Account is an account for employees to put pre-tax dollars into that can be used for qualified out-of-pocket medical expenses, which are not covered under any insurance plan.  An FSA gives employees the option to pay for dental, vision, co-pays, deductibles, prescriptions, chiropractic services, and other 213(d) expenses through the year.

Each year, an employee can participate up to the annual maximum contribution limit of $2,750 per year.

The BASE® Dependent Care Assistance Plan is an account for employees to put pre-tax dollars into that can be used for qualified dependent care expenses.  A DCAP gives employees the option to pay for daycare, preschool, before and after school care, and elder care.

Each year, an employee can participate up to the annual maximum contribution limit of $5,000 per year per tax household.

Here are some quick commonly asked questions:

  • Can an employee have an FSA and DCAP at the same time? Yes!  Because they pay for two different things, employees can have BOTH the FSA and DCAP to pay for qualifying out-of-pocket expenses. 
  • If the money in the FSA runs out, can the money from the DCAP be used? No!  The money put in each account can only be used for expenses relating to that account. 
  • When are the funds in the account available? With the FSA, the entire election is available on the first day of the plan year.  With the DCAP, funds are available as the deposits are collected through payroll. 
  • What is the best option? The best part is employees don’t have to choose one or the other.  Depending on the family’s need and financial situation one or both is the best option.

These two types of plans help employees pay for different services, but bring the same great benefits to both employer and employees.  Employers can offer their employees a benefits package that helps save money and make paying for medical and childcare expenses more affordable.  This addition to any benefit plan not only helps employees realize more take-home pay due to pre-tax funds, but the employer can use this enhanced benefits package as a recruitment tool and help retain employees.

For more information on the BASE® Flexible Spending Account and BASE® Dependent Care Assistance Plan, call 888-386-9680.