Brenda JacobsGeneral Articles

How to Save on Childcare Pt. 2

By July 12, 2016 January 21st, 2020 No Comments

The rising cost of childcare is an issue that many working parents face. Knowing ways to help save on childcare can help relieve the burden of continuing to work when there are young children at home.

The second cost saving that will be addressed is the Employer Provided Dependent Care Assistance Program (DCAP).

What is a DCAP?

A DCAP is a tax-favored arrangement by which the employer:

  1.  Reimburses employees for dependent care expenses,
  2. Makes payments directly to third parties for care of employee’s dependents, or
  3. Provides a dependent care facility for employees exclusively.

An employer must have a written plan document to establish a DCAP.


  1. Certain non-discrimination testing must be met for highly compensated employees to be eligible to participate, but all non-highly compensated employees are eligible.
  2. Reasonable notification to employees must be provided of the program’s availability.
  3. A written statement showing the amounts paid or expenses incurred by the employer must be provided to each employee on or before January 31 of the subsequent year.
  4. Reported on W-2 (but not as taxable wages)
  5. If a reimbursement plan, the employee makes elective pretax contributions to fund their individual reimbursement account.  These amounts are gradually reimbursed to the employee upon the submission of receipts for dependent care to the employer.  It is use it or lose it meaning any unspent amounts remaining in the account at the end of the year are forfeited.  There is a 2 ½ month grace period.

For more information on child care savings. Please contact Brenda Jacobs at (616) 608-8530 or