What is a DCFSA, anyhow?

If your company offers "child care benefits" right now, that usually means a Dependent Care Flexible Spending Account (DCFSA). That dulcet phrase just rolls off the tongue. But what is it, anyhow?

A DCFSA is a company-managed account that lets you pay for child care with money taken out of your paycheck before taxes. You still foot the bill; you just (usually) owe no taxes on your contributions, up to $7,500 a year. If you max it out, that's probably $2,000-$3,000 in savings per year, depending on your income and state.

But in many areas, full-time care for one young child can run $20,000 to $30,000 a year. Double that for two kids! A couple thousand dollars of taxes saved pales in comparison. It's better than a kick in the pants, but it's not enough.

This isn't because employers are stingy. For decades, this was close to the only tool the system gave them, so it became "the child care benefit" by default. The annual cap was set at $5,000 in 1985 - reasonably generous for the time - but then stayed put for 40 years even as care costs increased 800%. It's finally gone up to $7,500 this year, but that's still far below what was needed to keep up with care's well-above-inflation cost.

What has changed, finally, is the emergence of new options. There's now a way for employers to put much more money toward their people's actual care, with tax credits potentially covering a huge share of the cost. That's the opportunity my firm enables.

If your company's current child care benefit is a DCFSA and a phone number to call when your nanny cancels, that's probably because they think that's the best feasible option. Let's help show them otherwise.