How to choose your 2009 employee benefits: Part 2

What are the signs of autumn? Falling leaves, frosty mornings, and Open Enrollment. In this multi-part series, we'll help you sift through the choices among your employee benefits.

Part 2: Dependent-care flexible spending plans

Parents of young children—and children of aging parents—can both take advantage of dependent-care flexible spending plans offered by their employers. This benefit has great money-saving advantages, but be aware of its limitations.

With a dependent-care flexible spending plan, your employer gives you the option each year of setting aside up to $5,000, pre-tax, toward the care of a dependent. Folks in the top, 28-percent bracket would save $1,400 in federal taxes if they set aside the maximum amount.

To qualify, children under care must be younger than 13. The program can be day care, after-school care, even summer camp—as long as you need the care in order to work. To qualify for the tax deduction, you'll need to get a federal tax I.D. or Social Security number from the child-care provider, so folks paid under the table don't count.

At tax time, you'll have to fill out IRS Form 2441, Child and Dependent Care Credit, and include information on how much was spent from your dependent-care flexible spending account. By filling out this form, you may be eligible for an additional child-care tax credit. Here are some other ideas on saving money while raising a baby.  

The same general flexible-spending rules apply for adult dependents requiring adult day care. Here's an example from Aetna of what's eligible  under a dependent-care flexible spending plan. Check with your benefits department for specifics about your employer's plan.—Tobie Stanger