Author Topic: FSA Insurance option - dependent care?  (Read 2670 times)

chops

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FSA Insurance option - dependent care?
« on: November 18, 2015, 02:50:27 PM »
So I'm doing my insurance enrollments and I'm thinking about doing the FSA insurance option for dependent care.  We're having a child in late January, and after the Mrs and I take off our FMLA allowed 3mos each, we are expecting (as of right now, plans can change) to use child care of some sort.

Has anyone had any experience with using the FSA for dependent care?  I'm just reading about this now, it seems that you can take $5,000 / year out of taxable income this way.  Applicable dependent cost are reimbursable until March 15 the following year, so I will likely be able to use it all from Aug - Mar 15.

Thanks!

 - Chops
« Last Edit: November 18, 2015, 05:16:43 PM by chops »

KCM5

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Re: FSA Insurance option - dependent care?
« Reply #1 on: November 18, 2015, 02:57:54 PM »
Do it. Saves lots of money (depending on tax bracket).

But only do it if you're sure you'll use it. As you've probably read, it's use it or lose it.

There a tax credit you can take if you don't use the flex spending account, but it's not quite as lucrative. See here for more information on that: https://www.irs.gov/taxtopics/tc602.html

La Bibliotecaria Feroz

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Re: FSA Insurance option - dependent care?
« Reply #2 on: November 18, 2015, 05:10:29 PM »
I have used it for a couple years. Definitely saves $$$ because you aren't just saving on income tax, like with the tax credit, but on Social Security and whatnot, too.

The trick is to calculate your projected expenses as closely as possible. The grace period is nice! Supposedly you can downgrade your contributions if your child care costs change, but I have never tried it.

Mr. FP and I are lucky in that HIS open enrollment is June, because he's a teacher, but mine is October. So we have two chances a year to get it right!

GrOW

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Re: FSA Insurance option - dependent care?
« Reply #3 on: November 18, 2015, 05:52:31 PM »
A few things to consider

I believe that, unlike an medical/dental/vision FSA, a dependent care FSA can only reimburse money they you have paid at that time.

Don't forget to consider day care off days or off weeks, your vacation schedule, summer time off,  time that family may provide help like a mother coming for a few weeks, etc. They may not seem like they have a big pact but put together, they can reduce your costs a fair amount. Now if your monthly cost is so high that these things won't impact things, ignore that.

Put these things together and sometimes you end up being reimbursed less than your actual costs some months and more in others.

Also, if using non traditional daycare like a neighbor who watches kids in their home, you may find that your FSA administrator denies your claim. They like receipts from business entities with tax id #s.

ABC123

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Re: FSA Insurance option - dependent care?
« Reply #4 on: November 19, 2015, 11:00:41 AM »
I use the daycare FSA.  We spend well over $5k per year now, so there is no issue with using it all up.  But definitely make sure you will use all you sign up for since it is a use it or lose it.  Also, you can put in a claim until March 15, but all expenses must be incurred by December 31st.  The plan my employer uses is done through Wageworks, and they require a signed receipt with all claims.  I assume the would be same for other plans as well.  My plan allows you to either request that Wageworks pay the provider directly, or to pay me back.  I prefer to just pay up front and then get reimbursed.  The money gets taken out of my paycheck on Friday, and I usually have the money deposited from Wageworks the following Thursday - so the delay is pretty small.

catccc

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Re: FSA Insurance option - dependent care?
« Reply #5 on: November 19, 2015, 11:48:07 AM »
Do it if you are sure you are going to use it.  If there is a possibility that you will not, I might stick with taking the dependent care credit when you file your taxes, which is helpful, but not as good as the FSA.

I do believe you can also delay your decision to contribute to an FSA until your kid is born.  I think this is a "qualifying event" and allows you to make changes to your benefit elections within something like 30 days of baby's arrival.  You'd change your election along with adding baby to your health insurance plan.

Remember, you can only be reimbursed for what you have already paid into the FSA account, and for services actually rendered.  For example, if I pay a semester's preschool tuition of $4K in August for the period of preschool from September to December, and I have $2K in my FSA at the time, when September concludes, the FSA will pay me $1K.  If I only have $500 in my FSA when September concludes, the FSA will pay me $500.  I know these numbers don't make much sense timing wise, but hopefully you get the picture.

For extra mustachian points, I like to pretend that the FSA money doesn't exist, pay the tuition like it is a regular part of my budget, and when the reimbursement is available, I put that directly into a savings vehicle.

La Bibliotecaria Feroz

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Re: FSA Insurance option - dependent care?
« Reply #6 on: November 19, 2015, 02:30:52 PM »
A few things to consider

I believe that, unlike an medical/dental/vision FSA, a dependent care FSA can only reimburse money they you have paid at that time.

Don't forget to consider day care off days or off weeks, your vacation schedule, summer time off,  time that family may provide help like a mother coming for a few weeks, etc. They may not seem like they have a big pact but put together, they can reduce your costs a fair amount. Now if your monthly cost is so high that these things won't impact things, ignore that.

Put these things together and sometimes you end up being reimbursed less than your actual costs some months and more in others.

Also, if using non traditional daycare like a neighbor who watches kids in their home, you may find that your FSA administrator denies your claim. They like receipts from business entities with tax id #s.

Correct, but you can go ahead and submit the claim, and they will pay you when the money becomes available.

Anyone willing to sign a receipt and provide their SSN can be paid through an FSA (meaning anyone who pays taxes on their babysitting money). I have used an in-my-home sitter willing to do this and also a home daycare provider.  If your mom is willing to declare the $$ on her taxes, then sure, she counts.