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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.
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 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.)
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.