Dependent Care Reimbursement Account (DCRA) 

The County of Orange offers a Dependent Care Reimbursement Account (DCRA) to help you obtain possible tax savings for your child or dependent care expenses (i.e., day care costs). This plan offers you the opportunity to pay for your eligible dependent care expenses with before-tax salary dollars as provided under Federal tax law. If you want to enroll in the Dependent Care Reimbursement Account you must go through the Benefits Center Web Site or Benefits Resource Line within your 30 day enrollment period or during the annual Open Enrollment Period which takes place in the Fall.

You may be interested in the DCRA if you have:

• A child or children living with you under age 13, and for whom you claim dependent status on your income tax return;
• A disabled spouse; or
• A dependent relative (such as a parent or sibling) who is incapable of self-care and for whom you claim as a dependent on your income tax return.

How DCRA works:

You may enroll in DCRA through the County of Orange  Benefits Center Web Site at www.benefitsweb.com/countyoforange.html or through the Benefits Resource Line at 1-866-325-2345.  Determine the amount of money you wish to contribute to your DCRA account for the current calendar year. (You may authorize payroll contributions up to a maximum of $5,000 of your pre-tax salary over the course of the calendar year).

Important: When deciding how much to contribute to your DCRA account, carefully estimate your expected eligible dependent care expense for the year. You will not be able to change the amount you contribute to your account, unless you have a change in family status as defined by the IRS (see following page and Plan document which is available on the Benefits Center Web Site). If you have a balance in your account after January following the plan year for which you have not submitted a claim form, this amount will be forfeited per IRS regulations.

FlexServ will:
Divide your specified annual contribution into the number of pay periods remaining in the year through December. This amount will be deducted from your paycheck for the 26 pay periods of the current plan year. This is the amount which will be put into your DCRA account each pay period.

The bi-weekly amount is deducted from your paycheck before taxes are calculated. Therefore, your taxable income is reduced by the amount deducted from your paycheck for each of the 26 pay periods.

Claims Processing:
You pay the provider of your dependent's care directly.

You then file a reimbursement claim form to recoup your eligible expenses from your DCRA account. You may do this each pay period, and for up to 30 days following the close of the calendar year for expenses incurred during that year.

FlexServ is the Dependent Care reimbursement claims administrator for the County of Orange DCRA. Reimbursements will be made from your DCRA account after receipt of a completed claim form and required supporting documentation. No taxes will be withheld from this amount as it is considered a tax-free reimbursement under IRS Section 129.

HOW DOES DCRA COMPARE TO THE DEPENDENT CARE TAX CREDIT?

When you have dependent care expenses, the Internal Revenue Code gives choices with respect to income taxes.

If you use the DCRA account, the pre-tax payroll deductions are deducted from your pay before income taxes are computed. Your annual gross income reported on your W-2 at year end will already reflect the reduction in taxable income due to your participation in DCRA. Do not further reduce your income on your actual tax return to reflect your participation in DCRA.

If you claim a tax credit for those expenses instead of participating in the DCRA program, the County makes no adjustments to your W-2. The dependent care credit may be subtracted from any income tax owed when you file your individual tax return. The available credit starts at 30% of eligible expenses and drops as your salary increases. It applies to the first $2,400 in annual expenses if you have one eligible dependent, and the first $4,800 for two or more eligible dependents.

If you choose to use the DCRA account for reimbursement of eligible dependent care expenses, a dollar will be deducted from the amount which can be claimed as a tax credit for each dollar reimbursed under the DCRA program. This means you cannot use both the DCRA program and the tax credit to claim the same expenses.

HOW DOES DCRA AFFECT MY TAXES?

Money set aside in your DCRA account is not subject to federal or state income taxes. For example, if you normally earn $2,800 per month, and you decide to direct $300 per month to your DCRA account, your remaining taxable pay is only $2,500. You should see an immediate difference in your withholding taxes, and depending on your personal tax situation, a lower income tax bill at year end.

Since the tax credit rules are complex, there is no clear answer about whether the tax credit or the DCRA account is better for your individual situation. For some, using the tax credit will produce more favorable results. This can be true if your income is around $30,000 per year. See example on the following page.

EXAMPLE OF HOW DCRA CAN AFFECT TAXES:

*The California Child and Dependent Care Credit is no longer available.

(The example above is for illustrative purposes only. Your own situation can be determined only by a close look at your records.)

As you can see, Employee A would be better off to use the tax credit while Employee B would be better off to choose DCRA.

 ELIGIBLE DEPENDENT CARE EXPENSES

The IRS has specific guidelines about the types of eligible dependent care expenses that you can claim and how to obtain reimbursement for them.

Payment for dependent care expenses must be necessary so that you (and your spouse, if you are married) can work. If your spouse is disabled or a full-time student at an educational institution, you may also qualify to use the DCRA account.

Your dependent care provider must have a tax ID number (i.e., a Social Security or Employer Identification Number), and you are required to include the name, address and tax ID number of your dependent care provider on your tax return. The account cannot be used to pay for care provided by a person you claim as a dependent on your tax return, or by children or stepchildren under age 19. You will also have to include the tax ID or Social Security number of any dependent claimed as an exemption.

You may use your DCRA account to pay for day care expenses in your own home, at the home of another or at a day care facility. Certain restrictions apply. Please refer to the Plan Document for further details.

Note: Tuition expenses for a child enrolled in an educational facility (School), public or private, are not eligible for reimbursement.

HOW MUCH CAN I CONTRIBUTE TO MY DCRA ACCOUNT?

The IRS limits the amount you can contribute to the program each year. The maximum amount you can direct to your DCRA account each calendar year is the lesser of:

• Your earned income; or
• Your spouse's earned income; or
• $5,000 per year if you are a single tax payer or married and filing a joint return and $2,500 per year if you are married and filing a separate income tax return.

If your spouse is a full-time student or is physically or mentally incapable of caring for himself or herself, his or her income will be considered $200 per month if you are claiming one dependent, or $400 per month if you are claiming two or more dependents.

Further, if you and your spouse both have a DCRA account in which you participate, or if you both qualify for the County DCRA program, together you can designate no more than $5,000 per year for dependent care.

Mid-Year Election Change/Enrollment Restrictions to the DCRA

In addition to changing your DCRA contributions during an Open Enrollment Period, you are permitted to start, stop or change your elections if you experience a Qualified Life Event.

If you experience a Life Event, you may start, stop or change your contributions by contacting the Benefits Resource Line at 1-866-325-2345 within 30 days of the Qualified Life Event.

HOW DO I FILE THE CLAIM FOR REIMBURSEMENT?

You must file a DCRA claim form together with receipts and provide the following information in order for your claim to be processed:

This information must be on the claim form and the receipts.

• Name and address of Day Care Provider.
• Tax I.D. Number or Social Security Number of Provider.
• Dates of Service.
• Name of Dependent(s).
• Dollar Amount for Day Care Services.
• Signature of Employee

NOTE: Your claim will be delayed if the above information is incomplete.

Also note, you may file a claim for reimbursement after the first payroll deduction has been taken. Click here for claim form.

HOW DO I ENROLL?

Use the Benefits Center Web Site at www.benefitsweb.com/countyoforange.html or call the Benefits Center Resource Line at 1-866-325-2345 within 30 days of eligibility or during the next  annual Open Enrollment.  You will need your Social Security Number and PIN to access the Benefits Center Web Site and Resource Line.

HOW DO I OBTAIN MORE INFORMATION?

You may contact the Benefits Resource Line at 1-866-325-2345 for assistance.

ABOUT THIS INFORMATION

This information is intended to give you an overview. Actual benefits are determined under the provisions of the Plan Document. Should any conflicts exist between this website information and the Plan Document, the Plan Document shall prevail. You may view and print the Plan Document by logging onto the Benefits Center Web Site and click on “Review Plan Details” and Section 125 Plan. You will need your Social Security Number and PIN to access the Benefits Center Web Site and Resource Line.