Vanguard's Benefit Plan offers two types of flexible spending accounts (FSAs)—a health care FSA and a dependent day care FSA. You may elect to participate in one, both, or neither of these accounts. This page explains the dependent day care FSA. For information on the health care FSA, see Health care flexible spending account: Overview.
Your dependent day care FSA
When electing to participate in the dependent day care FSA, you authorize Vanguard to set aside a specific amount from each paycheck (before taxes are calculated and deducted) and contribute that amount to your FSA. (Because Social Security or federal income taxes are not paid FSA deposits, yearly take-home pay is effectively increased.)
Then, as you incur eligible expenses, you can request reimbursement. See "How FSA reimbursements work" below for more information.
Important IRS rules
- You cannot stop or change the amount deducted from each paycheck unless you experience a permitted election change.
- Expenses paid through an FSA cannot be claimed as tax deductions or tax credit on a federal income tax return.
- It is important to estimate your future out-of-pocket dependent day care expenses carefully:
- Money deposited into a dependent day care FSA can only be used for eligible dependent day care expenses.
- You cannot use the health care FSA and dependent day care FSA accounts interchangeably.
Eligible dependent day care FSA expenses
A dependent day care FSA allows you to use pre-tax income to pay for day care expenses for a child or an elder. Care providers must have a taxpayer identification number and must file a tax claim with the IRS to be eligible to participate in a dependent day care FSA.
Dependents whose day care expenses are eligible for reimbursement under the dependent day care FSA are:
- Your children under age 13, or over age 13 with disabilities.
- Anyone you claim as a tax dependent who requires special care, including spouses, parents, or a spouse's parents.
If you are single, or married and file a joint tax return, you can deposit up to $5,000 annually into a dependent day care FSA. If you are married and file a separate tax return, you can deposit up to $2,500 annually. Your spouse can also deposit up to $2,500 annually.
Note: Vanguard also has a Dependent Day Care Subsidy Program to assist you with eligible dependent day care costs. To be eligible for the program, you must establish a dependent day care FSA.
FSA claim deadlines
If you are enrolled in the FSA as of December 31 of the plan year, you have until March 15 of the subsequent tax year to incur eligible expenses for FSA reimbursement.
You have until May 31 of that year to submit a claim for reimbursement. Note: May 31 is the date by which the request must be received, not the postmark date. After that date, you forfeit any money left in your account.
How FSA reimbursements work
Here is a how a reimbursement request works:
- After you make an out-of-pocket purchase for an eligible dependent day care expense, submit the FSA claim form to PayFlex, along with supporting documentation, such as a receipt from your dependent day care provider.
- Once a claim is approved, the money is reimbursed from the FSA by check or direct deposit to your authorized bank account. You should be paid within seven business days of receipt of the claim.