Dependent Care Reimbursement Account

A Blue Priority Flex dependent care reimbursement account allows you to pay for eligible daycare expenses pre-tax.

You can use the account to set aside part of each paycheck pre-tax to care for your child, disabled spouse, elderly parent, or other dependent, so you can work or look for work. When you have an eligible expense, you submit a claim form and, once approved, are reimbursed with tax-free dollars from your account.

How do I get started?
At the beginning of the plan year, your employer asks you how much money you want to contribute for the year. You have only one opportunity a year to enroll, unless you have a qualified family status change, such as marriage, birth, divorce, or loss of a spouse’s insurance coverage.

The amount you designate for the year is taken out of your paycheck in equal installments each pay period. Qualified dependent care expenses are reimbursed up to the amounts you’ve contributed to the plan throughout the plan year.

How much should I contribute?
The maximum annual contribution is $5,000 (or $2,500 if married and filing separately).

Give some thought to calculating how much money to contribute for the year. If you put in more money than you need, by law, you lose it. However, some employers offer a grace period of up to two-and-a-half months to use the money.

Use the reimbursement account worksheet (pdf) to estimate the expected dependent care expenses for the next year.

How do I get reimbursed for expenses?
Submit a flex claim with receipts or your dependent care provider’s signature. Once your claim is approved, you’ll be issued a reimbursement check. Sign up for direct deposit (pdf) to speed up the reimbursement process.

What can I spend the money on?
You can take out your flex funds, tax-free, to pay for eligible dependent care expenses for qualifying individuals:

• Children 13 years and under who reside in your household.
• Adults/children mentally or physically incapable of self-care who spend at least 8 hours a day in your household.

View a list of eligible expenses.

What are the tax advantages?

• You can withdraw money tax-free to cover qualified dependent care expenses.
• Your contributions will be taken from your paycheck before taxes are calculated, lowering your income tax.

Dependent Care Account vs. Child Care Tax Credit
A flexible spending account may save you more in taxes than the Child Care Tax Credit, but it depends on your income. Consult your accountant or tax advisor to determine the best option for you.

Additional Guidelines for Dependent Care Reimbursement Accounts

• Dependent care expenses not related to work or school do not qualify for reimbursement.
• If you’re married, your spouse must be a wage earner, a full-time student, or disabled and unable to provide for his or her own care.
• You cannot claim dependent care expenses more than your annual salary or more than your spouse’s annual salary (whichever is less).
• If your spouse is disabled or a full-time student, the IRS assumes your spouse earns $250/month (one dependent) or $500/month (two or more dependents).
• You must be the custodial parent to use a dependent care reimbursement account, regardless of tax exemption status.

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Wellmark Blue Cross and Blue Shield is an Independent Licensee of the Blue Cross and Blue Shield Association doing business in Iowa and South Dakota. Blue Cross®, Blue Shield®, and the Cross® and Shield® symbols are registered marks of the Blue Cross and Blue Shield Association, an Association of Independent Blue Cross and Blue Shield Plans.