DCAP Benefits and the Sandwich Generation

Life expectancy in the U.S. has gone up over the years thanks to a variety of factors. However, longer lifespans are creating a conundrum for many Americans. Millions of people in the workforce find themselves caring for their children and aging parents/relatives at the same time. A Dependent Care Assistance Program, or DCAP, can help employees who are part of this “Sandwich Generation.”

Who are the Sandwich Generation?

The National Alliance for Caregiving has found that in 2019 there were 11 million people caring for both an adult relative and the children in their homes. Further, many of them are working outside the home as well. In addition to their hours of “professional” work, they put in another 22 hours per week caring for their dependents.

This increased burden leads members of the Sandwich Generation to experience considerable stress and strain:

  • About 1/3 of this group report struggling with emotional stress.
  • Many have no paid time off and experience financial stress any time they must be absent from work.
  • And finally, some even report physical strain.

How can employers help?

A DCAP is an employer-sponsored, tax-advantaged account that helps employees pay for dependent care. Funded by the employee on a pre-tax basis, these accounts increase take home pay, reduce taxable income, and possibly lower out-of-pocket care expenses.

One caveat is that a DCAP account is a use-it-or-lose it benefit. If the employee doesn’t spend DCAP funds before the end of the year, they can’t get them back or roll them over.

How can employees maximize DCAP benefits?

Here are some suggestions that can help employees maximize the funds they have set aside in a DCAP account.

Year-round options

If you work year-round, your dependent may need to attend day camps, whether just for seasonal breaks (such as for school children) or all year (such as for elderly dependents unable to care for themselves). These costs can be overwhelming, especially when you have multiple dependents. Thankfully, using your DCAP can help ease that burden. Keep in mind, overnight camps do not qualify.

As-needed sick care

Those who work outside the home may not have paid time off available to use in caring for a sick dependent. Those who work from home may find it impossible to care for a sick dependent while doing “professional” work at the same time. In either situation, you can use your DCAP account to help cover the expense of hiring a qualified caregiver.

Recurring expense claims

Claims for DCAP reimbursement require receipts to prove the funds were spent on a qualified expense. If your dependent attends daycare, preschool or after-school care on a regular basis, and the cost is the same for each billing period, you may be able to cut out a lot of repetitive paperwork.

Some DCAP administrators accept “recurring expense” claims. Just fill out a recurring expense claim form once, get the approved signatures, and then your reimbursement claims are automatically submitted for payment as per the terms of your plan. Since each administrator is different, contact your TPA for more information.

If you only use intermittent care, you’ll probably need to submit claims separately.

Non-approved expenses

There are many ways you can use DCAP funds, but there are several ways you can’t, as well. They include:

  • Care provided so that you can go somewhere other than work or school (such as babysitting for “date night”)
  • Care provided by a member of your household or by a non-custodial parent
  • Care provided for children who have reached their 13th birthday or above
  • School tuition for kindergarten or higher grades
  • The cost of lunches and snacks that you send with your dependent or that the care facility provides to your dependent at additional cost
  • Supplies, uniforms or clothing required by the care facility
  • Pet day care, walkers or boarding services

Getting reimbursed

Whether you submit intermittent claims or a recurring claim, you’ll need to make sure the receipts include information that proves the service was provided by an approved caregiver or facility. Make sure you have the following on/with your paperwork:

  • Your administrator’s claim form, if required
  • Your dependent’s name and date of birth
  • The amount charged
  • The start and end dates of the service
  • The caregiver’s name, address, and tax ID number (or Social Security number)

Because of the lack of detailed information they provide, you can’t use credit card receipts, cancelled checks, or balance-forward statements as documentation for a DCAP claim.

When you enroll in the DCAP benefit, your benefits administrator should provide information on how and when to submit reimbursement claims. You may need to mail the form and documentation, email them, or upload online or into a mobile app.

To save money, time and stress, consider enrolling in DCAP benefits and then maximize their use. If you have any questions, be sure to check with your HR or benefits administrator.

DataPath Administrative Services provides third party benefits administration services for FSAs, HRAs, HSAs, COBRA, and more to businesses, organizations and government agencies.