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Q & A w/ BBBA: Should our organization wait until care has been provided to reimburse DCAP payment to participants, or provide reimbursement for these expenses right away?

May 14, 2018

Q:  Should our organization wait until care has been provided to reimburse DCAP (Dependent Care Assistance Program) payments to participants, or provide reimbursement for these expenses right away?

A:  The short answer is yes, you should wait to reimburse a DCAP payment until the service has been provided, and here is how you can substantiate that requirement to your participants.

Many dependent care providers bill and require pre-payment of dependent care expenses, and it is important to make your DCAP participants aware up front that it is a requirement for all DCAP claims to be incurred and verified before being reimbursed.  Even though the provider has billed the participant for dependent care, it does not mean that the participant has received the reimbursable dependent care (the “incurred” requirement).  To do this correctly the dependent care provider must provide the participant with information stating that the expense has been incurred, a description and date of the services incurred, and the amount of the expense.  If the claim is submitted in advanced of services provided, these requirements cannot be satisfied.  Also, cafeteria plan regulations prohibit flexible spending arrangments, including DCAPs, from making any advance reimbursements of future expenses.

Your organization’s concern is to reimburses expenses incurred during the coverage period – an expense has been incurred when the care (service) is provided.  For example, a day care center’s bill for dependent care services in March cannot be submitted in February, even if a bill has been generated at that time by the provider.  The employee can submit the expense after the March services incurred are completed along with the appropriate documentation.

It is imperative that reimbursed DCAP expenses have met the “incurred” requirement during the coverage period, meaning that the care has already been provided at the time of reimbursement.  Keep in mind, only proper documention from the provider can be accepted – no self-certified documents by participants are permitted or can be accepted.

So that all parties understand the requirements for reimbursement, discussing the particulars is best done at the time a participant enrolls in the DCAP to avoid any confusion or delays when submitting reimbursable expenses.

Note:  A DCAP (dependent care assistant program) is an employer sponsored arrangement where an employer reimburses their employees for dependent care expenses, makes third party payments for the employee’s dependent care, or provides a dependent care facility for their employees. The dependent care is for qualifying dependents, which includes children, legally dependent parents, or a disabled spouse.

For more information regarding offering Dependent Care Assistance Programs (DCAP) as a part of the Employee Benefits for your organization, or to speak with one of our Advisors, email Jason Della Penna, Senior Vice President at Brown & Brown Benefit Advisors at jdellapenna@advisorsbb.com.


Brown & Brown Benefit Advisors