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Manisha Thakor

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Uncle Sam Can Help With Summer Camp Costs

Posted: 08/01/11 05:43 PM ET

Ask a working parent how they feel about summer and you may be surprised. Thoughts of beaches, barbeques, and balmy days at the ballpark are often overshadowed by something much less exotic - concerns about childcare.

If you have children under the age of 13, and you need childcare so that you can work, look for work, or attend school full-time, you are in luck. Dependent care flexible spending accounts ("FSAs") can save you up to 40% on a wide range of childcare-related costs.

I'm continually amazed at how many people have access to this valuable benefit at work, but don't utilize it. The three most common reasons I hear for people not taking advantage of this employee benefit are: (1) A belief that dependent care FSAs only cover a few scenarios, (2) A perception that the cost savings aren't that great, (3) A feeling that there is too much paperwork involved to make participation in a dependent care FSA worthwhile.

That's why I've teamed up with WageWorks on a nationwide campaign to help hard working employees better understand this valuable workplace benefit. So let's take a look at each of these three common concerns.


  1. What exactly is covered by a dependent care FSA? You can use these funds for before- or after-school care or special programs, a babysitter or nanny, and even the cost of day camps during the summer or other school holidays for any children under the age of 13. For a full list of eligible dependent care expenses, click here. And since it's the rare family who isn't feeling a tightening of the wallet, it's worth noting that there are summer camp options in almost all budget ranges. According to the American Camp Association fees for a full week of day camp can start at as little as $75 while the upper end can be in the $800 plus range (note: overnight camp fees are not FSA eligible expenses). On top of this, over 90% of camps offer some form of financial assistance ("camperships") while others offer discounts for things like multiple enrollments from one family. Combining all available discounts with a dependent care account can make summer childcare much more affordable.

  2. How much money you can save by using a dependent care FSA? Let's start with a quick review of how these accounts work. As with pre-tax accounts for healthcare and commuter costs, a dependent care FSA allows parents to select a specific amount of money during their firm's open enrollment period to have deducted from their paycheck throughout the year before taxes. This lowers both your taxable income and the amount of income taxes you owe. And the money you withdraw from your FSA for eligible expenses is not taxed either. Or said slightly differently, using an FSA to pay for qualified expenses is like being handed a coupon for up to 40% on a purchase you were going to make anyway. (Click here for a nifty calculator you can use to assess the cost savings of your particular situation).

  3. Are FSAs too much work? FSA participation is a simple three-step process.  First, review the list of eligible expenses and estimate how much you will be spending in the coming year. Second, during open enrollment season (typically during the fall) you decide how much you want to contribute to your dependent care (and/or healthcare and commuter) FSA.  In the case of dependent care FSAs, the maximum amount that can be contributed at present is $5,000. Note, healthcare and commuter FSAs are subject to different contribution limits, you can read more about all types of FSAs at SaveSmartSpendHealthy.com and FSAFeds.com). Also note that if you have what is called a "qualifying life event" such as getting married, divorced, widowed, birth or adoption of a child, or if you experience a significant rate hike in the cost of your childcare... you can adjust what's called your "FSA election" or how much you are choosing to contribute. Third, you pay those dependent expenses and then simply submit a claim with supporting receipts - and you will get those funds reimbursed back to you (and many firms allow you to receive those funds via direct deposit).

If you've already signed up for a dependent care FSA, this is a great time of year to ensure you are making the most of those FSA dollars. And if you haven't enrolled yet, let this article inspire you to talk to your Human Resources department ahead of this fall's open enrollment period so you are in the best shape possible to maximize the fun and sun of summer.

Are you making the most of your Dependent Care FSA?

[This post originally appeared at ManishaThakor.com.]

 
 
 

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