FLEXIBLE SPENDING ACCOUNTS

Dependent Care FSA

The IRS determines what expenses are eligible for reimbursement from an FSA. In general, eligible dependent care expenses must be incurred in caring for:

• Children 12 and under whom you claim as dependents on your federal income tax return
• Your spouse or any other dependent of any age who is physically or mentally unable to care for him or herself, and whom you claim as a dependent on your federal income tax return.

If you are married, you and your spouse must both be employed, and your work schedules must conflict so that dependent care services are necessary so both of you can work. Generally, if your spouse is not employed, your dependent care expenses will be eligible for reimbursement only if your spouse is a full-time student or physically or mentally unable to care for himself or herself.

Dependent Care Match
When you join a dependent care FSA, Valassis will match up to $600 of your contributions to the account, to help you pay child or adult day care expenses. Only associates hired by October 1 will be eligible for dependent care spending account match for the upcoming plan year.

The match will be made on a quarterly basis, with the first company contribution to your account being deposited by April 15. You will be matched the amount that you have contributed through the end of the quarter, up to $600.

Examples:

If you elected $4,400 for the year, then by the end of the first quarter, you would have personally contributed in excess of $600, so you will get the full match of $600 by April 15.

If you elected $600 for the year, then by the end of the first quarter you would have personally contributed approximately $138 so you would get a match of $138 by April 15. At the end of the second quarter, you would get the match to your contributions between 4/1 and 6/30, and so on.

Eligible Expenses
Please see the WageWorks website for a detailed list of expenses. Eligible dependant care expenses may include the following:

• Dependent day care provided at a facility that complies with local laws (including day care centers, nursery schools and preschools)
• Wages paid to a baby-sitter or companion in or outside your home during working hours (provided the person providing care is not someone you claim as a dependent on your income tax)
  • You must submit the tax-ID number or social security number of the sitter or company on your WageWorks claim form
• In-home care for a dependent (child or adult) incapable of self-care (including feeding, bathing, dressing and administration of medicine, etc.)
• Day camp fees (even if the camp specializes in a particular activity, such as computers or soccer) if the camp is providing work-related care
• You can count the cost of care provided outside your home if the care is for your dependent under age 13, or any other qualifying person who regularly spends at least 8 hours each day in your home
• Household services (when provided as part of dependent care), such as cooking, cleaning and general housekeeping

Ineligible Expenses
Some examples of expenses that are not eligible for reimbursement include:

• Dependent care that is provided by a relative under age 19, and/or a dependent you can claim on your taxes or your spouse
• Dependent care that your provider does not report as taxable income
• Babysitting for social occasions
• Tuition expenses for schooling in kindergarten or higher grades
• Dependent health care expenses (these expenses, however, may be reimbursable under the Health Care FSA)
• Overnight camp expenses
• Expenses in excess of your taxable income or that of your spouse, whichever is less
• Food, clothing or entertainment expenses
• Dependent care expenses claimed as a deduction or credit for federal or state tax purposes

The Internal Revenue Service publishes a booklet that provides guidance on claiming dependent care expenses on your taxes. To receive a free copy, contact the IRS directly at 800-829-3676 and request Publication 503, Child and Dependent Care Expenses. You may also review or download this information from the IRS Web site at www.irs.gov. You can also visit the WageWorks website for more information.

Federal Dependent Care Tax Credit
A Dependent Care FSA is not the only way you can save on your taxes when you pay dependent care costs. Expenses you incur that are eligible for reimbursement from a Dependent Care FSA are the same expenses that are eligible for a credit on your federal income tax return—but you can’t use the same expenses for both types of tax savings. In fact, the IRS requires that expenses eligible for the federal tax credit be reduced, dollar for dollar, by any reimbursements you receive from a Dependent Care FSA. Any eligible expenses not applied toward one method may be applied toward the other.

Contribution Limits for Highly Compensated Associates
The IRS may limit contributions made to a Dependent Care FSA by certain highly compensated associates. In the event that this limitation affects you, you will be notified.

Reporting Your Dependent Care Account Contributions
If you use the Dependent Care FSA, the IRS requires that:

• Valassis report any before-tax contributions you redirected from your salary to your Dependent Care FSA on your W-2 each year, and
• You file the name, address and taxpayer identification number or Social Security number of your dependent care provider with your federal income tax return.