Can an employee enroll in a Dependent Care Assistance Program (DCAP) before their child is born?

Can an employee enroll in a Dependent Care Assistance Program (DCAP) before their child is born?

A Dependent Care Assistance Program (DCAP), sometimes called a Dependent Care FSA (or “DCFSA”), is an account-based plan allowing employees to set aside pre-tax income to pay for eligible daycare expenses that enable the employee (and their spouse, if married) to work, actively look for work, or attend school.

Although the birth, adoption, or placement for adoption triggers a HIPAA Special Enrollment Right allowing a new parent to elect the DCAP midyear, enrollment does not require an existing qualifying dependent. Therefore, an expectant parent can elect a DCAP during open enrollment to prepare for future childcare needs. That said, reimbursements cannot be accessed until after the child is born, adopted, or placed for adoption, and once work resumes. In addition, any unused funds are generally forfeited at the end of the plan year (or at the end of its 2.5-month grace period, if designed to include such a feature). These restraints underscore the importance of considering the timing of the expected expenses as part of careful election planning.