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Let’s talk about ways to best support the caregivers among us. As employees return to work outside of the home and are faced with uncertainty regarding fertility assistance and feeling the effects of inflation, caregivers are in a particularly unique position.
If employees are caring for small children, they may be experiencing an unprecedented increase in childcare costs combined with limited options. On the other end of the spectrum, caregivers for aging parents can face ambiguity surrounding what level of care an elder may need and what services they can afford.
Designing affordable health plans to help your employees
To help solve these challenges, employers are beginning to evaluate their plan design to help support different segments of their workforce. Recently, my colleagues and I hosted a webinar discussing this push towards a more equitable plan design for consumer-driven benefits. The webinar discussed:
• Ways employers can advance equity in health and economic matters.
• How adjusting health plan design can help close the gap.
• The role Health Savings Accounts (HSAs) can play in addressing healthcare affordability for those who need it most.
If you missed the live webcast, you’re in luck–you can access the recording here. The webinar replay is packed with actionable information—from HSA contribution matches and income-tiered HSA contributions to Spanish language translations and Lifestyle Spending Accounts (LSA) for tuition reimbursement. Watch the replay for even more detailed information on these findings and strategies to remedy the situations.
A focus on Dependent Care Flexible Spending Accounts
In this article, I’ll focus on one element discussed in the webinar—Dependent Care Flexible Spending Accounts (DCFSAs) to support working parents and elder caregivers. We got a lot of questions on this topic, so I’m happy to dive in to review the options and provide answers. Follow along to learn more.
How return to work policies can squeeze caregivers
In a post-pandemic world, businesses are adopting different working models, such as fully remote, hybrid, or fully in office. In situations where employees were working remotely from home, there are considerations when employers ask employees to come back into the office several days a week. Working outside of the home may significantly affect the dependent care situations they previously relied on. And because of potentially prohibitive costs, there’s a large need for reasonably priced dependent care.
Childcare is among the largest expense for families, and parents are now faced with the highest childcare costs we’ve seen in decades. Unfortunately, elder care costs aren’t much better. For example, it costs $10,830 a month to stay in a long-term nursing home and $5,806 per month for an assisted living facility, on average. To be clear, DCFSAs don’t cover long-term nursing home care. It’s worth mentioning that some of these costs mean that elderly parents live with adult children instead.
Unfortunately, these costs aren’t likely to decrease anytime soon, so it’s important for employers to consider providing support through their benefits structure to curb any financial strain or anxiety.
How can employees use DCFSA funds?
Employees can use their DCFSAs in a variety of ways, including:
• Care of dependent children under age 13 by a babysitter
• Eligible daycare expenses
• Eligible before- or after-school program expenses
• Care of a child over 13 who is incapable of caring for themselves
• Care of a spouse or other elder eligible dependent who is incapable of working or caring for themselves
How can employers adjust plans and contribution strategies to support caregivers?
You can think of your specific employee needs when designing plan options to help them with their childcare or dependent care needs. Here are considerations for contributing to your employees’ DCFSA accounts, and an additional consideration involving an LSA.
For example, consider offering the following options:
• A DCFSA post-tax contribution, allowing employees to maximize the $5,000 contribution limits. That amount would be taxed.
• A DCFSA pre-tax employer contribution that is part of the $5,000 maximum contribution limit.
• Tiered DCFSA contributions.
• An employer contribution for childcare as a stipend into an LSA for the employee to use for eligible childcare expenses.
How can employers support workers caring for aging parents?
Many people are beginning to realize the advantages of using their DCFSA to pay for elder care. In the webinar, we went over a mock scenario featuring James and Scott. James, an 80-year-old man, lives with his son, Scott, who claims James as a tax dependent. Because James suffered from an earlier stroke, he needs help during the day from an in-home caregiver as Scott works.
Scott uses the DCFSA opportunity through his work to contribute the yearly maximum that helps to pay for James’s care. With the DCFSA, Scott can pay out of pocket for James’ monthly eligible elderly expenses, and then submit all receipts at the end of the year for easy reimbursement. Alternatively, he can submit his receipts to be reimbursed from accrued funds.
For qualifying DCFSAs, employees may also have a Pay My Provider option through HealthEquity, where members can submit their information and have an eligible elder daycare provider paid as their funds accrue in the DCFSA to pay for elder care. Another tip is to remind your employees of the eligible expenses that a DCFSA can cover, like elder daycare and that transportation may be an eligible elder care expense if provided by the elder daycare provider.
More resources to learn about ways to support caregivers
DCFSAs can be a useful tool for caregivers, and employers can build them into their benefits plans to support employees who may need extra help to care for their dependents. You can learn more about DCFSAs at the resources found below.
HealthEquity does not provide legal, tax or financial advice.
DCFSAs are never taxed at a federal income tax level when used appropriately for eligible dependent care expenses. Also, most states recognize DCFSA funds as tax deductible with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.
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