DEPENDENT CARE EXPENSES AND TRANSPORTATION COSTS

[Guest kristinlobell]

I have an employee who uses the dependent care account to take care of her husband who is mentally disabled. He attends an adult daycare during the day so that she is able to continue working and there are transportation costs for the bus he rides- does anyone know if these expenses are allowable?

[Guest JerseyGirl]

The IRS allows only fees for *custodial care* to be reimbursed. If the transportation costs are billed separately, by an entity other than the adult daycare facility, they will not qualify. However, if the fees for transportation are incidental to and inseparable from the custodial care charges, with no itemization of the invoice, then it could be considered an eligible expense simply because you can’t break out what the value of the transportation would be.

Hope this helps.

[Alf]

Can't transportation costs in theory be reimbursed if they are inextricably linked to obtaining care?

I have always thought of transportation as being like postage and sales tax in some cases where it is necessary to get the medicine or medical care. Am I way off or what?

[Guest JerseyGirl]

Personally, I think the dependent transportation charges should be eligible, but the IRS hasn’t asked for my opinion just yet, and I don’t think the phone call will be coming in any time soon. I also suspect that adult day care is a very expensive proposition, costing far more annually than the $5,000 allowed to be pre-taxed, so I would think that the employee will be paying a great deal of un-reimbursed expenses, so exactly what they are for is kind of beyond the point.

Alf:

You’re not way off at all in your beliefs regarding additional fees associated with procuring medicines or medical care (as long as the specific plan itself allows for mileage to the pharmacy, etc), but what you are saying is apples and oranges. Let’s stick to apples and apples, because the IRS certainly has a different set of standards for a DCAP FSA than it has for Med FSA (all of which I think they write in pencil, so they can erase and change whenever the spirit moves them).

The phrase “if the fees for transportation are incidental to and inseparable from the custodial care charges” is straight out of the EBIA Cafeteria Plans Manual chart for determining the eligibility of a DCAP claim, and would put these charges in the *YES* column. So if transportation charges are buried in the total invoice for care, how are you, when adjudicating claims, supposed to know that? When you look at the documentation, you see fees for services, and if it doesn’t specifically state *transportation*, how are you to know (officially, at least)? Similarly, if you have a claim for a 3 year-old for 10 hours daily of day care, you can be pretty sure the entire amount is for *custodial care*, but if the child is 10, and it’s not July or August, some of that 10 hours must be a tuition fee, and the invoice will need to be broken out accordingly, with only the before and after school charges considered custodial in nature.

[E as in ERISA]

Can't "disabled dependent care" potentially be either a medical or dependent care expense (as noted in Pub 502)? Many transportation expenses are deductible for medical care purposes, so that part might be reimbursable under the medical FSA....

[Kirk Maldonado]

It sounds like this is "custodial care" not medical care. But dependent care might apply, I haven't thought it through.