A Dependent Care Account (DCA) is a type of Flexible Spending Account (FSA) that lets employees set aside pre-tax dollars for eligible dependent care expenses. It’s a great way for families to save money on childcare or caregiving costs.
Common eligible expenses include:
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Daycare or nursery school for children under 13
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After-school or summer day camp programs (not overnight)
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Care for a disabled spouse or dependent who lives with the employee and requires care while they work
Because the contributions are made pre-tax, employees lower their taxable income and stretch their paychecks further.
The New $7,500 Limit
Thanks to the One Big Beautiful Bill, the annual DCA contribution limit has been increased to $7,500 per household (up from $5,000).
For many working families, this extra $2,500 of pre-tax savings will make a big difference in covering the ever-rising cost of care.
Benefits for Employers Too
It’s not just employees who benefit from a DCA — employers win as well.
Here’s why:
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DCA contributions are employee-funded (no employer outlay).
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Employers don’t pay FICA (Social Security & Medicare) or FUTA taxes on employee DCA contributions.
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Some TPAs even include a DCA at no additional cost if an employer already offers a health care FSA.
Employer Savings Example:
Let’s say one employee maxes out their new DCA limit:
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$7,500 contribution × 7.65% FICA = $573.75 in tax savings for the employer.
Multiply that by several employees, and the savings add up quickly. Offering a DCA can reduce payroll taxes while enhancing your benefits package — a true win-win.
Why This Matters Now
Childcare costs are climbing, and employees are searching for ways to manage them. With the new higher contribution limit, a DCA is no longer just a perk — it’s a practical, high-value benefit that helps employees and employers alike.
Bottom Line: If your group already has an FSA, check with your TPA about adding a DCA. For many employers, it costs nothing extra to offer — and it could save both you and your employees significant money.