WC Administrators


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 Frequently Asked Questions about Cafeteria Plans

This information is provided as a service for clients of WC Administrators. Some of these answers may be plan specific and will not apply to plans not administered to plans not administered by WC Administrators, LLC.

General Questions

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Am I eligible to participate in the Dependent Care Reimbursement Plan?
You are eligible to participate if you meet all of your plan's eligibility requirements and if it is necessary for you to pay dependent care only because you work. If you are married, your spouse must also work, go to school full time, or be incapable of self-care for you to be eligible.

Can dependent care services be provided in my home?
Yes. your dependent care services can take place either inside or outside of your home.

How is my Account funded?On your Election form, you specify the annual amount of Health Care Reimbursement costs you wish to pay for. An equal portion of this annual amount will be deducted from each of your paychecks during the Plan year and put into your Account. If you prefer, you may indicate the amount(s) you want taken from your paycheck, as long as the Annual Election stays within your plan's limits.

What is an "Eligible Day Care Expense" for which I can claim a reimbursement?
You may be reimbursed for work-related dependent care expenses ("Eligible Day Care Expenses"). Generally, an expense must meet all of the following conditions for it to be an Eligible Employment Related Expense:

  1. The expense is incurred (expenses are considered incurred only if the service has already occurred) for services rendered after the date of your election to receive Dependent Care Reimbursement benefits and during the calendar year to which it applies.
  2. Each individual for whom you incur the expense is a "Qualifying Individual."
  3. The expense is incurred for the care of a Qualifying Individual (as described above), or for related household services, and is incurred to enable you (and your Spouse, if applicable) to be gainfully employed. Expenses for overnight stays or overnight camp are not eligible. Tuition expenses for kindergarten (or above) do not qualify.
  4. If the expense is incurred for services outside your household and such expenses are incurred for the care of a Qualifying Individual who is age 13 or older, such Dependent regularly spends at least 8 hours per day in your home.
  5. If the expense is incurred for services provided by a dependent care center (i.e., a facility that provides care for more than 6 individuals not residing at the facility), the center complies with all applicable state and local laws and regulations.
  6. The expense is not paid or payable to a "child" (as defined in Code Section 152(f)(1)) of yours who is under age 19 by the end of the year in which the expense is incurred or an individual for whom you or your Spouse is entitled to a personal tax exemption as a Dependent.
  7. You must supply the taxpayer identification number for each dependent care service provider to the IRS with your annual tax return by completing IRS Form 2441.
You are encouraged to consult your personal tax advisor or IRS Publication 17 "Your Federal Income Tax" for further guidance as to what is or is not an Eligible Employment Related Expense if you have any doubts. In order to exclude from income the amounts you receive as reimbursement for dependent care expenses, you are generally required to provide the name, address, and taxpayer identification number of the dependent care service provider on your federal income tax return.

Who is a "Qualifying "Individual" for whom I can claim a reimbursement?
You can be reimbursed for expenses incurred in care of:

  1. An individual age 12 or under who is a "qualifying child" of the Employee as defined in Code Section 152(a)(1). Generally speaking, a "qualifying child" is a child (including a brother, sister, step sibling) of the Employee or a descendant of such child (e.g. a niece, nephew, grandchild) who shares the same principal place of abode with you for more than half the year and does not provide over half of his/her support; or
  2. a Spouse or other tax Dependent (as defined in Code Section 152) who is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as you for more than half of the year.
Note: there is a special rule for children of divorced parents. The child is a qualifying individual of the "custodial parent", as defined in Code Section 152(e).

Can my relatives provide the service?
You can not claim expenses (a) if the service provider is your child or stepchild and is under age 19, or (b) if you claim the service provider as a dependent for Federal income tax purposes.

When must the expenses be incurred in order to receive reimbursement?
Eligible Day Care Expenses must be incurred during the Plan Year. You may not be reimbursed for any expenses arising before the Dependent Care FSA becomes effective, before your Election Form becomes effective, or for any expenses incurred after the close of the Plan Year and unless noted otherwise in your specific Plan, after your participation in the Dependent Care FSA ends.
If the Employer has adopted a grace period, you may also be able to use amounts allocated to the Dependent Care FSA that are unused at the end of the Plan Year for expenses incurred during the grace period following the end of the Plan Year. To find out if your plan has adopted a Grace Period, please contact your Plan Administrator.

What if my dependent care expenses for the plan year are less than the amount I have contributed?
Under the Federal tax law, unused amounts credit to your account as of the end of the Plan Year (less any claims submitted during a grace period) will be forfeited after the grace period. Forfeited amounts will be used to offset administrative expenses and future costs, and/or applied in a manner that is consistent with applicable rules and regulations (per the Plan Administrator's sole discretion). No amount may be paid to you except in reimbursing eligible medical claims.

If the Employer has adopted a grace period following the end of the Plan Year, amounts allocated to the Health FSA that are unused at the end of the Plan Year may also be used to reimburse expenses incurred during the grace period following the end of the Plan Year. Any amounts not used for expenses incurred during the Plan Year and during the grace period will be forfeited.

 

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This Site does not, and is not intended to, provide any financial, insurance, legal, accounting, or tax advice, and shall not be relied upon by you in that regard.

The Site is not intended, nor shall it be used by you, as a replacement for personal research or professional advice from a registered financial advisor.

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WC Administrators, LLC is not a subsidiary or affiliate of John Hancock Life Insurance Company (U.S.A.), Manulife Financial, The Guardian Insurance & Annuity Company, MassMutual Financial Group, Great West Retirement Services, Ohio National Financial Services, The Hartford Retirement Plans, Nationwide Investment Services and/or their affiliates.

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