Normally excludable dependent care assistance benefits cannot exceed an annual limit of $5,000 ($2,500 MFS) (Code Sec. 129).

Under normal circumstances Dependent Care Assistance Programs (DCAP) allow unused funds from a particular year to be carried over if used during a 2½ month grace period after the end of the plan year.

For 2021 and 2022 only, the grace period has been extended to 12 months, provided the employer’s plan adopted the change. If the employer did not adopt the change, then the grace period continues to be 2½ months. (IR 2021-105, Notice 2021-26).

See Notice 2021-26 for examples where the DCPA is a non-calendar year plan.