Come November, most active-duty and some Reserve and National Guard members will be able to sign up for flexible spending accounts to help pay for child care, preschool, day camps and even adult day care services as part of the federal Flexible Spending Account program.
The program is one of several personnel initiatives announced in March by Defense Secretary Lloyd Austin and allows personnel to obtain a Dependent Care Flexible Spending Account, or DCFSA. Troops can set aside up to $5,000 in pretax income through payroll deductions -- money that can be spent on approved types of care.
By enrolling in a flexible spending account, service members contribute funds that aren't subject to payroll taxes, which lowers their taxable income and results in more take-home pay. The money can be used for before and after school care, nanny expenses, au pairs, babysitting, day care and nursery school, and summer day camps, as well as care for adults who can't take care of themselves.
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The Defense Department estimates that roughly 400,000 service members will qualify for an account, including those with children under age 13 or who have older dependents, including spouses, with special needs who require around-the-clock care.
Those entitled to enroll include active-duty DoD service members, as well as National Guard and reserve members on Title 10 orders of at least 180 days or more, although those troops can sign up for the program with pending orders 31 days before or 60 days after activation.
Currently, Guard and reserve members on Title 32 orders, other reserve members and Coast Guard personnel are not eligible.
Service members can enroll for the new program during the federal benefits season from mid-November to mid-December -- exact dates to be announced by the Office of Personnel Management. The accounts will be active effective Jan. 1.
To help service members understand the benefits and limitations of DCFSAs, the DoD Office of Financial Readiness has included information on the accounts on its website. Military OneSource has launched an education campaign on the benefit with updated fact sheets, and FSAFeds, the federal office that manages the program, has a wealth of details on how to enroll and use the program.
During a press conference with reporters Thursday, DCFSA Executive Director Jennifer Walker and Andy Cohen, director of the Office of Financial Readiness at the DoD, acknowledged that the program is new and may not be well understood by service members who haven't used similar accounts.
Cohen said DoD personal financial professionals or MilTax consultants will provide a free consultation on how the benefit can affect a family's finances.
"This is a tool to help families find affordable child care, and it's vital for maintaining overall military readiness," added Walker.
While the first opportunity to sign up will be during the federal benefits open season, military personnel will have additional times when they can start an account, during periods known as qualifying life events. These include a change in employment status; marriage; divorce; birth or adoption; change in child or elder care providers; change in coverage; deployment; and permanent change of station orders.
Once service members enroll, the Federal Flexible Spending Account Program will work with their payroll providers to ensure that the funds are deducted from pay. Members have a FSA savings account that they can access through an app. They then can choose to have funds paid directly to providers or submit a claim to receive the funds.
Walker said that, while there are segments of the military population who aren't eligible to access the benefit, the DoD is "continuing to work through the complexities of extending this benefit for those additional populations."
"[We] understand there are concerns from that population. We will share more information when it is available," Walker said.
Cohen encouraged members to learn more about the program and reach out to a DoD financial counselor or Military OneSource to learn more.
"The counselors can help walk them through the pros and cons to determine if the DCFSA is right for them and help them make that informed financial decision," Cohen said.
Even those who don't want to enroll should consider reaching out to these resources to learn more about DoD financial programs, he said.
"They're available to help with any other financial questions that folks have about making sure that they're building financial well-being," Cohen said.
Editor's Note: This article has been updated to correct the dates of the 2023 federal benefits open season, which have yet to be announced.
– Patricia Kime can be reached at Patricia.Kime@Military.com
