University of Minnesota
Office of Human Resources
http://www.umn.edu/ohr
612-625-2016

Dependent Daycare Account - Deposit Amount & Payroll Deductions

The IRS requires that if you do not use the full balance in your Dependent Daycare Account for expenses incurred as of your effective date through March 15 of the following year, you lose the unused portion — the "use-it-or-lose-it" provision. Any remaining balance in your Dependent Daycare Account at that point is forfeited and retained by the plan. Please calculate your expenses carefully to ensure you will use the full amount.

  • When determining the amount to contribute based on your expenses, note that dependent daycare expenses for children who turn 13 years old during the year are not covered after their 13th birthdays. You may cancel your account after your only eligible child turns age 13, provided you request this change within 30 days of that event (see Making Changes).

IRS Regulations

You may contribute a minimum of $100 and a maximum of $5,000 per family from your pay each calendar year on a pre-tax basis for out-of-pocket eligible dependent daycare expenses provided by a qualified dependent care provider. The IRS has established the following regulations:

  • If you are single, you may deposit up to $5,000 not to exceed your total earned income.
  • If you are married and filing a joint federal income tax return, you and your spouse may deposit up to a total of $5,000 annually. However, if both you and your spouse work, your deposit may not exceed your income or your spouse's income, whichever is less.
  • If you are married and filing a separate federal income tax return, you may contribute a maximum of $2,500 annually.
  • If you and your spouse participate in separate Dependent Daycare Accounts, your total annual combined deposits may not exceed $5,000 or the amount of your income or the amount of your spouse's/same-sex domestic partner's income, whichever is less.
  • If your spouse/same-sex domestic partner is a full-time student or is incapable of self-care, his or her income is assumed to be at least $200 per month if you have one eligible dependent or $400 per month if you have two or more eligible dependents.

Mid-Year Enrollment

If you enroll mid-year in the Dependent Daycare Flexible Spending Account, you may elect to deposit the annual maximum allowed. The amount you elect is deducted from your pay in equal installments for the remainder of the calendar year. (Please note that any expenses incurred before your effective date will not be reimbursed.)

Continuing Appointments Less than 12 Months

If you hold a continuing appointment that is less than 12 months and do not receive a paycheck for two or three months of the year, payroll deductions end during the period in which you do not receive a paycheck and start again with the first full pay period after your return.

At that point, the amount of your year-to-date contributions are subtracted from your authorized annual amount, and the difference is deducted from your remaining pay checks in equal installments through year end. You are still able to submit eligible expenses incurred during the non-work period, provided you do return to work at the beginning of the next academic year.