Dependent Care Assistance Plan

Dependent Care Assistance Plan (DCAP), also known as a Dependent Care FSA, is an account established by an employer to allow employees to set aside money from each paycheck on a pre-tax basis to pay for qualifying dependent care expenses such as: daycare, preschool, before & after school care, and elder care.

Employers sponsor DCAP as a means of making dependent care more affordable by allowing employees an opportunity to set aside a portion of their pre-tax wages to pay for qualified dependent care expenses. The addition of this benefit can help with recruitment and retention of employees.

Even though this is considered an employer provided plan, the employee elects to make a pre-tax contribution for dependent care expenses that reduces the employer’s share of payroll taxes.

Employees can continue to work, and still have peace of mind that they have established funds to help pay for the cost of dependent care expenses.

Since these funds are transferred from the employee’s wages on a pre-tax basis, employees save federal, state, Social Security, and Medicare taxes. By setting aside these dollars pre-tax, employees are able to increase their take-home pay.

Continue to DCAP: Eligibility