Although summer may seem far away, it’s never too early for parents to start planning for their children’s summer activities – including summer camp options. This is also the perfect time to address a very common question: How can a dependent care flexible spending account (FSA) be utilized to cover summer camp expenses?

Dependent Care FSA: The Basics

Let’s start with the basics. A dependent care FSA is a great way to save on day care costs by setting aside pre-tax money each year, up to a limit set by the IRS.

For your participants to make the most of their dependent care FSA, it's important to understand what qualifies as an eligible expense. Dependent care eligible expenses include day care expenses for children or other eligible dependents. For an expense to be eligible, it must be for care of a qualifying dependent, must be incurred during the coverage period, and must be used to allow the participant to work.

So, who exactly is a qualifying dependent? Generally, this includes children or qualifying relatives under the age of 13, as long as they aren’t claimed by another taxpayer. It can also include children or relatives 13 or older who cannot care for themselves and have the same address as the employee for more than 50% of the year. Additionally, if an employee’s spouse is physically or mentally unable to care for themselves and lives with them for more than half the year, the spouse also qualifies.

There are several types of care that qualify for reimbursement from a dependent care FSA, including care at home or a day care facility, before and after school care, and day camps.

However, it’s important to know that not all types of care qualify. For example, care for a night out isn’t eligible because it’s not related to an employee’s job. Additionally, care provided by a spouse or child who’s under the age of 19, as well as care provided by someone the participant claims as a dependent, won’t qualify.

Which Summer Camps are Eligible?

According to the IRS, the cost of summer day camps can be reimbursed under certain conditions. Day camps can function as day care because they provide custodial care to children under 13 while parents work, attend school, or look for work. This may include sports camps, computer camps, etc.

For a summer camp expense to be eligible, the following criteria must be met:

1. The care must be for a qualifying child or relative while a participant (and their spouse, if married) is working, job hunting, or studying full-time. Only day camps attended on workdays are eligible. If a participant’s child attends a day camp for entire week but they don’t work one of those days, they can only be reimbursed for the portion of expenses that cover the days they are working.
2. The service must be incurred during the plan year. If a participant enrolls in the middle of the year, they can only be reimbursed for expenses incurred after the enrollment date.
3. Third-party documentation must be submitted as proof of the expense.

Keep in mind that in order to report these expenses at the end of the year with their federal income tax return, participants need to include the federal ID number for the summer camp and should be prepared to get this from the provider.

Which Summer Camps are Ineligible?

Not all summer activities qualify as day camp expenses under a dependent care FSA. The following expenses are not eligible for reimbursement from the dependent care FSA:

• Overnight camps (even if day camp portion can be broken out)
• Camp during non-work hours
• Summer school or tutoring camps
• Field trip fees or meals, if broken out separately
• Primarily educational camps (i.e. swimming lessons, music lessons, dance class, etc.)
• Transportation expenses related to camp, if broken out separately
• Equipment fees or other associated materials related to the camp environment

When can Summer Camp Claims be Submitted?

Dependent care claims can be submitted after the service has been provided and expenses have been incurred. This does not always align with when a participant pays for it. For example, if a parent wants to get reimbursed for registration fees paid to secure a spot at a day camp, they can submit the expense right after making the payment. However, it’s important to know that the claim will be marked as eligible but remain pending until the actual camp dates occur. Once the dates arrive, the system will automatically release the claim for payment.

Remember, FSA funds expire at the end of the plan year. To make sure participants get the full value of their account, they should be sure to submit all claims by the claims submission deadline to avoid losing any funds.

Understanding Mid-year Election Changes

Employees are able to make a change to their dependent care FSA election mid-year if they experience a permitted election change event. Adding a new day care provider, including a summer camp, is a permitted election change event that allows a participant to add a dependent care FSA or increase their dependent care FSA election mid-year.  In order to qualify for the mid-year change, the normal rules must apply. This includes:

• The request for the election change must be made timely. This is generally within 30 days of the event (new day care provider).
• The effective date of the change will be the later of:
• the effective date of the permitted election change event or
• the date the change is requested.
• The dependent care FSA is only eligible for claims incurred on or after the date the dependent care FSA was added (or only eligible for the increased election amount if increasing an existing election)

Questions?

We’re here to help! There are answers to many dependent care FSA FAQs on our website. If there are additional questions, please contact your assigned Client Account Representative, whose information can be found in the footer of your EBC online account.

You can also share this online resource with your participants to help them understand the value of a dependent care FSA and how they can use one to save money on eligible day care expenses.