DCFSA: How Helpr Drives Utilization
When childcare falls through, companies lose money. In 2019, in the State of Washington alone, $2.08 billion was lost in economic activity from missed work due to childcare issues. That number was $3.47 billion in Pennsylvania, and the national average was about $1 billion per state.
The Covid-19 pandemic exacerbated childcare struggles. A recent survey carried out by the Harvard Business Review (HBR) found that during the pandemic, 20% of working parents either left work completely or reduced their hours “solely due to childcare” issues. Existing gender roles also crystalized at home, as a record number of women left work in 2020.
What has been lost among the headlines are real discussions about solutions to the childcare crisis, like Dependent Care Flexible Spending Accounts (DCFSA), also known as Dependent Care Assistance Plans (DCAP). This compensation benefit allows employees to pay for dependent care on a pre-tax basis.
DCFSA benefits have existed in the Internal Revenue Code (IRC) since the seventies, yet more than half of private-sector employees do not have a DCFSA benefit. Unfortunately, many employees who have the benefit struggle to use it. At Helpr, as a global care provider and software service, we’re changing that.
The DCFSA Benefit: An Overview
What is a DCFSA Benefit?
A DCFSA is a company benefit plan that allows employees to make pre-tax contributions to an account to fund qualifying dependent care expenses. This includes childcare expenses. Qualifying children must be under the age of 13.
These accounts may also be used for other qualifying persons who are 13 and older. To qualify, those 13 and older must be physically or mentally incapable of self-care and regularly spend at least eight hours each day in the employee’s home. IRS Publication 503 at 3.
DCAP plans must comply with Internal Revenue Service (IRS) requirements as defined in Section 125 of the Internal Revenue Code (IRC) and accompanying regulations. The IRC calls these types of pre-tax care plans “Cafeteria Plans.”
DCFSA Maximum Contributions
Both employees and employers can make contributions to the account, however, the IRS limits maximum tax-free contributions. Prior to the pandemic, the maximum tax-free DCFSA contribution was $5000, or $2500 per every married person filing taxes separately.
Under the American Rescue Plan, signed into law on March 11, 2021, the maximum contribution has been temporarily increased to $10,500, or $5250 for every married person filing taxes separately. The IRS also recently issued new guidance explaining how unused DCFSA funds may be carried over into 2021 and 2022.
Eligible Dependent Care Expenses
To be a DCFSA eligible expense, the main purpose of the expense must be for the well-being and protection of the qualifying person. This includes expenses for nannies, preschool, daycare, before- and after-school care, transportation from care providers, among other expenses. It does not include costs of school at the level of kindergarten or above, or items such as clothing or food.
Backup Care Benefit
DCFSA contributions may also be used to pay for backup care, which is care that an employee turns to should their usual care plan fall through. This includes, for example, paying relatives or trusted friends who offer to watch qualifying children. Backup care became a focal point for care seekers and providers last year when childcare centers closed due to Covid-19.
How Helpr Drives DCFSA Utilization
Helpr is a global care benefit provider for working families. Through partnerships with employers, Helpr creates a solid care infrastructure to manage DCFSA plans while also helping employees coordinate and pay for care.
As an innovative software solution, Helpr drives DCFSA utilization by removing the administrative barriers that have historically plagued employees and HR personnel. With Helpr, employees are also less hesitant to start an account because they’re better prepared to actually use their contributions.
With Helpr, employees can do all the following from their phone:
- Track FSA contributions and account balances in real time.
- Process direct payments to care providers.
- Find vetted in-network providers for various types of care.
- Add their own family members or other backup care providers to pay them using the DCFSA benefit.
Track DCFSA Balances in Real Time
DCFSA contributions are made by employees via payroll. The account balance can then be seen on an employee’s paystub. Since most companies have transitioned to digital recordkeeping, paystubs are typically located in a folder in the company’s HRS system. To keep track of their balance, employees must either search their HRS system or make an inquiry to the provider.
Historically, checking an FSA balance in real time hasn’t been as easy as, for example, checking a bank account balance from a phone application. With Helpr, it is that easy. Using the Helpr app, employees can access their DCFSA account information and usage in real time, which makes it easier for employees to budget their primary and backup care.
Process Direct Payments
Making payments with FSA funds has gone through various iterations. Today, companies typically ask employees to pay out of pocket and then apply for DCFSA reimbursements, or they provide a special credit card. Employees use the card to pay for these expenses using FSA funds. In either case, however, employees are responsible for keeping receipts and other records. And regardless of the method, payments to family members or friends are out of pocket and then reimbursed.
Helpr allows employees to pay their care providers directly from the app using money in their DCFSA. Receipts are then created and then emailed directly to the employee. Employees can also upload their own payment method, should a copay apply.
Find Care Providers
Finding trained providers can be a frustrating and time-consuming process. Employees typically search online, talk to colleagues, or reach out to friends and family. Although employees are often able to create a plan, sometimes the cost is too high. More commonly, care plans fall through, leaving the family without a caretaker and very little time to come up with a plan B.
Helpr centralizes the caretaker search process while also providing 1-on-1 consultations with employees who need extra help creating a plan. Helpr has also established a directory of screened care providers in key cities in North America, and we continue to increase our reach as we create new employer partnerships.
Most importantly, Helpr provides employees with options for their “plan B” or backup care. This way, when an employee’s typical care plan fails, they still have choices for backup care through Helpr.
Manage Backup care
Backup care is one of the most important components of any Dependent Care FSA plan. This is because unexpected disturbances in the employee’s regular care plan will most likely result in missed work. Disturbances may include a sick child who can’t go to daycare or a caregiver who cancels last minute, leaving the employee scrambling for a backup plan.
Helpr acts as a safety net for employees who need a backup plan. Through the Helpr care network, employees can find backup care quickly by searching the directory for available providers. They can also upload a provider to the Helpr app if they prefer to call a trusted friend or family member. These friends or family members can then be paid for their time using the employee’s DCFSA funds.
How Increasing DCFSA Utilization Benefits Companies
Studies show that employees who receive family care benefits have increased job satisfaction and organizational commitment. By reducing work-related conflicts in an employee’s family life, working mothers and fathers are better prepared to engage positively in their working environment.
However, the benefits of providing a care benefit extend beyond retention and company culture. DCFSA benefits decrease missed workdays, reduce recruitment costs and also reduce taxable income. With Helpr, companies will secure and maximize these important gains by increasing DCFSA utilization.
Here at Helpr, we’re innovating new efficient pathways for companies to implement and use DCFSA and other care benefits.