“Benefits changes in 2023 are all about family. The need for heightened family support during the pandemic seems to have evolved into long-term parental benefits.”
Employers are part of the childcare solution. According to the Society for Human Resource Management, family-friendly work benefits are the fifth most important benefit behind health, retirement, leave, and flexible working benefits.
One way employers can support their employees with young children is through a dependent care flexible spending account (FSA), which allows pre-tax dollars to cover eligible childcare expenses (up to age 13), up to $5000 a year for joint and $2500 for single filers. Only the parent who has custody of the child may use an FSA. Funds can also be used to care for a spouse or relative who is physically or mentally incapable of self-care and lives with the employee. Contributions must be expended in the year they are contributed, so any unused funds will be forfeited (use-it-or-lose-it).
The dependent care FSA is offered by 57% of employers and employers can contribute to an employee’s dependent care FSA. The employer contribution can be in the form of seed contributions (automatic deposits), matching contributions (dollar-for-dollar matches based on the employee contribution) or flex credits (employer money applied to “purchase” qualified benefits from a cafeteria plan). However, the combined pretax contributions between the employer and employee cannot exceed the IRS annual maximum. Also, eligible expenses can only count once, although employees can combine the FSA with the child care tax credit which is $3000 for one child and $6000 for two or more.
In addition to dependent care FSAs, providing paid leave is essential for new parents. Over one-third (39%) of employers provide paid parental leave.
