Meanwhile, a Dependent Care FSA allows participating employees to pay expenses for dependent children under the age of 13 and for a spouse or other dependent who is unable to care for himself or herself. Care by a sitter may also be an eligible expense. If married, both employee and spouse must work, or the spouse must be a full-time student. Employees sign an agreement allowing their salary to be reduced each pay period and deposited into their FSAs. Amounts contributed are not subject to state or federal income taxes or social security taxes.
Participants determine the amount to be placed into each account, based on their individual needs.
After paying eligible dependent care and medical care expenses, participants send their receipts to the administrator to be reimbursed from the FSA account for those costs. Once approved, money will be withdrawn from the participants' accounts and a check will be issued to them. The reimbursements are also tax free. There are several things to consider in determining whether to participate in one or both of these FSAs. First, once participants select the amount they want to contribute, they generally cannot change that amount for the entire plan year.