ERISA Benefits Law Desk ReferenceERISA Benefits Tech, LLC

Part 13 · Chapter 4

Dependent Care Assistance Programs: §129 and §125

Law stated as of October 3, 2026 · COBRA, HIPAA, and Welfare Benefits

Scope and status

This chapter states the durable Code §129 and §125 framework governing dependent care assistance programs. Dollar limits and indexed thresholds are noted where they are statutory; current indexed amounts and any legislative changes should be confirmed before relying on them. The nondiscrimination sections reflect the August 2026 proposed §129 regulations.

Sections

The first section is shown in full. The other sections are listed by title; their text is available to subscribers.

What a DCAP Is

Code §129 lets an employer provide dependent care assistance to employees on a tax-favored basis. A Dependent Care FSA is a DCAP funded by employee pre-tax salary reductions through a §125 cafeteria plan. A DCAP can also exist outside a cafeteria plan — for example, employer-paid on-site dependent care or an employer paying a provider directly. Both forms are governed by §129; only the salary-reduction form is also subject to §125. Self-employed individuals (sole proprietors, partners, more-than-2% S corporation shareholders) may participate in an employer-funded DCAP but cannot participate in a §125 cafeteria plan or make pre-tax contributions.

  1. §129 Core RequirementsSubscribers
  2. Eligible ExpensesSubscribers
  3. Substantiation and Debit CardsSubscribers
  4. Use-or-Lose, Grace, Run-Out, and Spend-DownSubscribers
  5. §125 Overlay for Salary-Reduction DCAPsSubscribers
  6. Exclusion Limit and Tax ReportingSubscribers
  7. ERISA, COBRA, HIPAA, and HSA InteractionSubscribers
  8. Issue-Spotting ChecklistSubscribers

The first Part of each chapter is open to everyone. The remaining sections, with their authority and practice points, are available to subscribers and to clients of ERISA Benefits Law Group, PLLC whose engagement includes access.

Sign inSubscribe