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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. 

HRA Options Are Endless

With BASE®, businesses have multiple options to choose from in helping save valuable tax dollars with the help of Health Reimbursement Arrangements. A Health Reimbursement Arrangement (HRA) is a tool for business owners to increase their tax savings and to offer tax-free health benefits. An HRA may reimburse for qualified medical expenses such as co-pays, deductibles, and health insurance premiums.

What are the options?

BASE® Section 105 HRA – Available to small business owners to deduct up-to 100% of health care costs, including individual insurance premiums and qualified out-of-pocket medical expenses as a business deduction. The typical BASE® HRA client saves an average of over $5,000 in tax savings.

ADVANTAGE: Businesses will reduce the financial impact of health care expenses and pay for eligible out-of-pocket health care expenses with tax-free reimbursements to the employee.

BASE® QSE HRA – Available to business owners with less than 50 full-time employees and no traditional group health plan, giving them the option to offer their employees a better benefits package. With the QSE HRA, employees have the ability to secure their own medical insurance and use the funds to pay for insurance premiums, co-pays, deductibles, eye care, dental care, or other qualified health care expenses.

ADVANTAGE: Businesses will attract and retain talented employees with an increased benefits package, with employees having additional money to help with the rise in cost of health care.

BASE® Integrated HRA – Available for employers with a group health plan in place looking to reduce the overall cost of insurance coverage. The Integrated HRA gives employers the flexibility to help their employees pay for medical expenses not covered by health insurance.

ADVANTAGE: Businesses have more control of the overall cost of their benefit plans, and employees do not contribute funds to the HRA.

Plus, two NEW HRAs for 2020…

BASE® ICHRA – Available to businesses of all sizes that are looking for different options outside of standard group health insurance. The ICHRA will integrate with individual health insurance to provide business owners with a great alternative in providing health benefits. This plan helps to streamline benefit options and cut costs without reducing value when it comes to employee health benefits.

ADVANTAGE: Businesses will save money by not having to provide a traditional health care plan to any or all employees, and employees now have additional money to help with the continuous rise in health care and are able to pick the insurance coverage that is right for them.

BASE® EBHRA – Available to employers that offer a traditional group health plan to provide an additional $1,800 pre-tax to reimburse employees for dental and vision, COBRA, and short-term insurance premiums.

ADVANTAGE: Employers have the ability to expand their benefits package, and employees have an additional $1,800 pre-tax to put towards their medical expenses. Health Reimbursement Arrangements offer a variety of plan design options to meet the needs of business owners of varying sizes.

Call BASE® at 1-888-386-9680 for a consultation regarding HRAs or visit BASEonline.com to learn more.