The Federal Employee’s Dependent Care FSA At A Glance

As childcare costs continue to rise exponentially, it’s critical that all Federal employees understand one of their most robust benefits, the Dependent Care Flexible Spending Account (DCFSA). The DCFSA is a savings account established by your agency with specific tax advantages to help you cover the cost of dependent care. So, if your agency has adopted the Federal Flexible Benefits Plan, read on to learn how to utilize your DCFSA to save on your childcare costs.

Note: Do not confuse the FSA with a Health Savings Account (HSA) (Read about HSAs here).

How Does The FSA Work?

You decide how much to contribute to your DCFSA during the open enrollment season. The amount you have selected will be evenly divided and deducted from your paychecks throughout the year. Because your contributions are deducted before your income is taxed, you can use dollars that would have went to Uncle Sam to pay for your childcare costs. To access the funds in your DCFSA, you will file a claim for reimbursement with the plan administrator.

Think of the DCFSA as a savings account to pay the costs of work-related dependent care expenses.


  • Funds contributed to the DCFSA are deducted from your earnings before they are made subject to payroll taxes.
  • The maximum annual contribution limit is $5,000.
  • DCFSAs has a two-and-a-half-month extension to utilize the account balance.
  • You can use DCFSA funds for work-related dependent care expenses, such as day camps, babysitting, and after/before school programs.
  • Childcare expenses must be for a child under 13 (unless disabled).
  • Remember to save all your receipts; it’s essential not only for reimbursement claims but also in determining how much money to allocate to your FSAs for the following year.
  • Enroll during the Federal Benefits Open Season (November/December) for participation in the following year.
  • Reenrollment is required as enrollment does not carry forward into the next year.
  • If married, both spouses must work or be searching for work to utilize the DCFSA.


You can enroll during the Open Enrollment period (November – December) or anytime a qualifying life event occurs (marriage or birth of a child, etc.). New employees have up to 60 days from their hire date to enroll. An important point to remember is that re-enrollment is required each year, so don’t forget to re-enroll every Open Enrollment period if you want to continue to use your DCFSA.

How Much Can You Contribute?

The maximum you can contribute to your DCFSA each year is $5,000. However, when you are determining how much to contribute to your account, keep in mind that any remaining balance at the end of the year or grace period is forfeited. This is known as the “use it or lose it” rule. So, plan carefully, don’t fund your account with more money than you plan on spending on eligible expenses within the year. That being said, DCFSA participants have a two-and-a-half-month extension to finish using their account balance. So, you could continue to file claims for reimbursement until the following March 15th.

What Are Eligible Expenses?

For an expense to be eligible, it must meet two requirements: be work-related and be for a qualified individual. An expense is work-related if it allows you and your spouse (if married) to work or search for work. Additionally, a qualified individual for childcare purposes is a child under 13 or older if disabled. The following are some common eligible expenses:

  • After School Programs
  • Babysitting (work-related, in your home or someone else’s), and
  • Day Camps

For a list of eligible expenses review IRS Publication 503.

Final Thoughts

As most things go in financial planning, there’s no one-size-fits-all when it comes to flexible savings accounts. To decide if a DCFSA is right for you, take stock of your dependent care expenses and ensure they would qualify. If you have qualified ongoing or expected costs in the upcoming year, a DCFSA may be a great use of your money. If you can’t think of ways you’d use the account, then you probably don’t need one. You can find additional resources on the FSAFEDS website. And as always, if you would like help developing your financial plan, consult with a qualified financial planner.

Author: Jose Armenta, MsBA, CFP®, ChFC®, EA

Hi, I’m Jose Armenta, a Certified Financial Planner practitioner. For over 14 years, I have worked with or among federal employees, from serving in the Marine Corps to my stint as a police dispatcher and now as a financial planner specializing in helping FERS federal employees. In that time, I have spoken to hundreds of federal employees about their benefits and retirement. Helping federal employees maximize their benefits, reduce taxes, and live confidently is a passion of mine. When I am not perfecting financial plans, you’ll find me at the shooting range, playing the drums, or breaching blanket forts with my three little ones.