A Lady Guide to Open Enrollment, Part 2: Dependent Care and Life Insurance

Yesterday I reviewed the basics of health care benefits you may be sorting through during your employer’s Open Enrollment period. Today I’m covering the rest of it: Dependent Care elections and other insurance options.

Dependent Care FSA: If you pay for childcare, you are able to have that money deducted tax-free, similar to a medical FSA. If you know you’re going to be paying for childcare, a dependent care FSA makes sense. This tax-free account can be used for childcare expenses for the current year, just like the medical FSA. It does not carry over, so don’t overestimate what your expenses might be. The limit for 2013 continues to be $5000, which is laughable for anyone who knows what center-based, full-time daycare costs, never mind if you have more than one child. But hey, it lowers your taxable income by $5000, so don’t look the gift horse in the mouth. Here’s the rub – you can’t pay for future childcare expenses. This means you can’t pay February’s tuition with January’s deductions. Also note that this is for childcare only, not private school tuition. Once your child is in kindergarten, after school program costs may be paid with these funds, but not the kindergarten tuition. Summer camp fee may also be paid with these funds.

For example: I used to pay my son’s daycare bill every two weeks, in coordination with our pay dates. For the first bill of January, I would pay it out of our checking account. Once I had the receipt, I would submit it for reimbursement. The direct deposit reimbursement would be credited to Mr. Sally J’s paycheck, and then I’d pay the next bill. It was sort of a pain, but once the submittal/reimbursement pattern was set, it worked out just fine.

ProTip: Ask about the reimbursement process before you need the reimbursement money. Find out what paperwork you’ll need from your child care center or sitter, and find out how and when you’ll be reimbursed.

Note that an Dependent Care FSA is different from the Child Care Tax Credit. If you spend more than $5000 on child care per year, you may put $5000 in an FSA and also apply the credit, which could be good for up to another $1000.

Additional Life Insurance and Other Benefits: Chances are, you may have some life insurance and disability insurance through your employer. Sometimes there are options to add insurance for a spouse or child. There is no reason to do this unless you are unable to obtain insurance elsewhere, or if you are just looking for convenience. Read the fine print about your disability insurance. There’s short-term disability and long-term disability insurance, and they cover what their names imply. Find out what your employer offers, and explore getting additional coverage if you think it’s necessary.

**Disclaimer: Please note that this article is for informational purposes only. Always check with your employer about your particular employee benefits.