The Child/Elder Care Spending Account

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The Child/Elder Care Spending Account

Limits on Contributions for Highly Compensated Employees

Certain Internal Revenue Service (IRS) limits apply to the Child/Elder Care Spending Account for highly compensated employees. In 2008, you are considered a highly compensated employee if your 2007 W-2 compensation was $100,000 or more. The Child/Elder Care contribution limit in 2008 for highly compensated employees is $2,800. If you are subject to this limit, you will be notified. Please Note: This Internal Revenue Service (IRS) rule does not affect the Health Care Spending Account contribution maximum of $8,000.

The Child/Elder Care Spending Account allows you to pay on a before-tax basis for child or elder care expenses that permit you — or you and your spouse, if you're married — to work. The Child/Elder Care Spending Account works similarly to the Health Care Spending Account. If you participate, you decide how much you want to contribute to your account.

You can contribute between $240 and $5,000 a year (subject to certain legal limits for highly compensated employees) on a before-tax basis to pay for eligible out-of-pocket dependent day care expenses. If you are married, the maximum amount you can contribute is $5,000 or the amount of your spouse's income, whichever is less. If your spouse's employer offers a similar account, the most you and your spouse can be reimbursed during a tax year is $5,000 on a combined basis. If you are married, but file separate income tax returns, your maximum contribution amount is $2,500 a year.

If you begin contributing during the year (as a newly eligible employee), the maximum contribution you can make is $5,000, which will be taken in equal installments over the remaining pay periods for that year. For example, if you are hired on June 1 and you elect $3,000, you will contribute $3,000 for the remainder of the year. If you are a full-time employee, this means your contributions will begin on July 1 and the amount deducted each pay period will be $250.

Here are some additional key points about how the Child/Elder Care Spending Account works:

Your Expenses. When you incur an eligible expense, you must submit a claim for reimbursement from your account.

Please Note: The Health Care Spending Account debit card cannot be used for child/elder care expenses.

Your Reimbursement. You can only receive reimbursement for eligible expenses up to the amount that you have actually contributed to your account, and only for services that you have actually received prior to claiming reimbursement.

Your Eligible Tax Dependents. You can use the Child/Elder Care Spending Account for eligible care incurred for:

A child under age 13 for whom you claim a personal exemption on your income-tax return; or

Any dependent (including your spouse) who is physically or mentally incapable of self-care who lives with you for more than six months out of the year, or who otherwise meets the definition of a dependent under the Internal Revenue Code (IRC) definition during the period of coverage.

If you are submitting claims for dependent care expenses incurred outside your home, your dependent must spend at least eight hours a day in your home. If you're divorced or separated and have custody of an eligible child, you may be able to use the Child/Elder Care Spending Account even if you've agreed to let your spouse (or former spouse) claim your child as an exemption for tax purposes.

Your Spouse's Status. If you're married, you can participate in a Child/Elder Care Spending Account only if your spouse is:

Employed, whether part-time, full-time, or self-employed;

Looking for gainful employment;

A full-time student; or

Physically or mentally incapable of self-care and is the dependent for whom you're claiming expenses.

Your Care Provider. The Internal Revenue Service (IRS) requires that your claim include a receipt with the name, address, telephone number, and taxpayer identification number (or Social Security number) of the caregiver. Without this information, the care generally won't qualify as an eligible Child/Elder Care Spending Account expense.

Continuing Participation. If you leave JPMorgan Chase before the end of the year, you can continue to be reimbursed for expenses incurred up to your termination date, up to the balance in your account (subject to the claim filing deadline).

Internal Revenue Service (IRS) Publication 503 provides detailed information about eligible and ineligible expenses under the Child/Elder Care Spending Account. You can request a copy by calling the Internal Revenue Service (IRS) at 1-800-829-FORM (1-800-829-3676) or you can view this publication by logging on to www.irs.gov via the Internet.

How to Enroll


If You:	What You Need to Do to Enroll:
Are an Employee	During an annual benefits enrollment period, you can make your elections through the Benefits Web Center via My Rewards @ Work or via the Benefits Call Center. At the beginning of each enrollment period, you'll receive instructions on how to enroll. You must re-enroll each year to continue participating for the following year. You should plan your elections carefully. You can't change your election during the year unless you have a qualified change in status. Please see "Qualified Change in Status" for more information.
Are a Newly Hired Employee	If you've just joined JPMorgan Chase and are enrolling for the first time, you need to make your choices through the Benefits Web Center via My Rewards @ Work or via the Benefits Call Center within 31 days of your date of hire if you are a full-time employee, and within 31 days of becoming eligible if you are a part-time employee. Part-time employees will receive their enrollment materials within the 31 days prior to becoming eligible and can enroll at that time. You can access your enrollment materials online via Company Home > HR & Personal > Pay & Benefits > Enrollment Materials. (In most cases, a copy of these materials will also be sent to you via interoffice mail. However, you do not need to wait for these materials to arrive to make your enrollment elections online.)*
Have a Change in Work Status or Qualified Change in Status	If you're enrolling during the year because you're a newly eligible employee due to a work status change or you have a qualified change in status, you'll have 31 days from the date of the change in status to make your new choices through the Benefits Web Center via My Rewards @ Work or by contacting the Benefits Call Center and speaking with a Service Representative.* Please see "Qualified Change in Status" for more information.

* Special restrictions may apply concerning the processing of spending account enrollments and payroll contributions after mid-December of any year. Please contact the Benefits Call Center for more information.

If You Do Not Enroll

If you do not enroll when you first become eligible, you won't be able to enroll until the next annual benefits enrollment period unless you have a qualified change in status, which includes a change in your dependent care expenses. Please see "Qualified Change in Status" for more information.

When Participation Begins


If You:	When Participation Begins:
Are an Employee	The contributions you elect during the annual benefits enrollment period become effective at the beginning of the following plan year (January 1).
Are a Newly Hired or Newly Eligible Employee	The elections you make as a new hire take effect as follows: If you are a full-time employee, coverage begins on the first of the month following your date of hire. If you are a part-time employee regularly scheduled to work at least 20 but less than 40 hours per week, coverage begins on the first of the month following 90 days from your date of hire. Any contributions you make will be deducted from your pay in equal installments throughout the remainder of the year.* For example, if you are hired on June 1 and you elect $3,000, you will contribute $3,000 for the remainder of the year. If you are a full-time employee, this means your contributions will begin on July 1, and the amount deducted each pay period will be $250.
Have a Qualified Change in Status	The elections you make as a result of a qualified change in status (such as marriage, divorce, or the birth or adoption of a child, etc.) or work status change (such as adjustment to your regularly scheduled work hours that results in a change in eligibility) will take effect as of the day of the qualifying event, if you have already met the plan's eligibility requirements and if you make any eligible changes through the Benefits Web Center or by contacting the Benefits Call Center within 31 days of the qualifying event. If you miss the 31-day deadline, coverage for certain benefits will be effective as of the date you contact the Benefits Call Center.*

Changing Your Contributions

You may change your contribution amounts during the year only if you have a qualified change in status, including a change in your dependent care expenses. Please see "Qualified Change in Status" for more information.

Plan carefully, because you cannot change the amount of your contribution to the Child/Elder Care Spending Account during the year except in limited circumstances as determined by JPMorgan Chase in accordance with Internal Revenue Service (IRS) guidelines. If you do not spend all the money in your account for expenses incurred during the plan year, the unused balance cannot be returned to you or carried forward for use during the following year. Unused balances left in your Child/Elder Care Spending Account are forfeited.

Eligible Expenses

Eligible expenses are those incurred from the effective date of participation through the date participation ends. The following specific expenses are currently considered by the Internal Revenue Service (IRS) to be deductible child or elder care expenses for federal income tax purposes. Therefore, they're eligible for reimbursement through the Child/Elder Care Spending Account. Because the deductibility of these expenses is always subject to IRS review, JPMorgan Chase can't guarantee that the same expenses will always be eligible (or ineligible) for reimbursement from the Child/Elder Care Spending Account.

You can use the Child/Elder Care Spending Account for eligible care expenses incurred for an eligible dependent.

Please Note: You must actually incur an eligible expense and receive the service prior to claiming reimbursement.

This list is subject to change at any time.

Eligible expenses under the Child/Elder Care Spending Account must also be incurred so that you — if you're married, you and your spouse — can work. Such expenses include, but are not limited to:

Care at licensed nursery schools or day camps (excluding most expenses for grades kindergarten and above or overnight camps). To qualify, the school or center must comply with state and local laws and receive a fee for its services if it cares for seven or more children;

Payment to a housekeeper who is primarily responsible for providing day care;

Payment to someone who provides care in your home, as well as related taxes you pay on that person's behalf;

Care provided at an adult day care facility (but not expenses for an overnight nursing home facility) for any eligible dependent;

Day care provided by before-school or after-school programs;

Day care provided inside or outside your home by anyone other than your spouse, a person you list as your dependent for income tax purposes, or your child under age 13;

Household services related to the care of an eligible dependent who lives with you; and

Any other qualified dependent care expense as defined by the IRC.

For more information about employment-related dependent care expenses that qualify for the federal tax credit, visit the Internal Revenue Service (IRS) web site at www.irs.gov, or call the IRS at 1-800-TAX-FORM (1-800-829-3676) and ask for IRS Publication 503, "Child and Dependent Care Expenses."

If the IRS changes its ruling concerning the deductibility of a particular expense, JPMorgan Chase will accept that ruling effective on the date prescribed by the IRS.

Please Note: Any such change by the IRS to the tax-deductible status of an expense does not allow you to stop or start contributions to a Child/Elder Care Spending Account.

Expenses Not Eligible

The following expenses are not eligible for reimbursement through the Child/Elder Care Spending Account:

After-school care provided coincidentally with a program for which the primary purpose is education — for example, an after-school religious training program;

Care in unlicensed day care centers or care by providers who won't provide you with their taxpayer identification number or Social Security number;

Care that's not needed for you to work — for example, baby-sitting fees during non-working hours;

Child care expenses that enable you or your spouse to do volunteer work;

Education expenses for a child in kindergarten or above;

Expenses paid to one dependent you claim (or could claim) on your tax return to care for another dependent (for example, paying one child to care for a younger child) if the person you're paying is under age 19 or can be claimed as an exemption on your federal income tax return;

Health care expenses for dependents (these are reimbursed through the Health Care Spending Account — not the Child/Elder Care Spending Account);

Overnight summer camp expenses;

Transportation expenses to or from a day care center;

24-hour nursing home care for a parent or spouse; and

Otherwise eligible care that's not provided by an eligible provider.

Please Note: This list may change at any time based upon Internal Revenue Service (IRS) guidance.

Your Provider's Tax Information

To be reimbursed for child/elder care expenses, your claim must include the care provider's name, address, and taxpayer identification number (or Social Security number). Without this information, your expenses will not be eligible for reimbursement from the Child/Elder Care Spending Account.

Reimbursement Amount

Unlike the Health Care Spending Account, the Child/Elder Care Spending Account covers your eligible expenses only up to the balance credited to your account through payroll deductions at the time you request reimbursement. As your contributions are deducted from your pay throughout the year, you'll automatically be reimbursed for any outstanding expenses you've submitted, up to the year-to-date amount already contributed (minus any previous reimbursements).

Please Note: If you fail to provide substantiation when requested by ADP, you will be required to repay the amount of unsubstantiated/ineligible expenses.

Your account will only cover expenses for services that have actually been incurred, not for future expected services or expenses.

When Participation Ends

In general, your participation under the Child/Elder Care Spending Account will end on the day that:

You stop making required contributions;

Your employment with JPMorgan Chase is terminated for any reason;

You no longer meet eligibility requirements;

The Child/Elder Care Spending Account is discontinued for any reason;

You choose not to re-enroll for the following year during the annual benefits enrollment period (coverage will end on December 31 of the current year);

You begin receiving benefits under the JPMorgan Chase Long-Term Disability Plan;

You go on an unpaid leave of absence (not due to disability); or

You begin receiving severance payments under the JPMorgan Chase Severance Pay Plan.

Federal Income Tax Credit

The Child/Elder Care Spending Account will save you money by lowering the amount of your income subject to federal (and, in most cases, state and local) income taxes. However, the Internal Revenue Code (IRC) prevents you from taking the federal dependent care tax credit on your personal income tax form for expenses already reimbursed through your account.

Usually, if your family's annual taxable income is $15,000 or more, it's more tax-effective to have expenses reimbursed from the Child/Elder Care Spending Account than to take the tax credit. The maximum amount of dependent care expenses that can be used in calculating the federal dependent care tax credit is $3,000 in 2008 for one dependent and $6,000 in 2008 for two or more dependents. The Child/Elder Care Spending Account, however, allows you to contribute up to $5,000 on a before-tax basis, regardless of the number of dependents.

In some cases, you may be able to use both the tax credit and Child/Elder Care Spending Account. However, any dependent care expenses otherwise eligible for the federal dependent care tax credit will be reduced, dollar-for-dollar, by the amounts you receive from your Child/Elder Care Spending Account. The following chart provides a brief comparison of the two alternative tax treatments under current tax law. Only you can determine which is better for you based on your personal financial situation. You may want to consult a tax advisor before making a decision. JPMorgan Chase cannot provide you with tax advice.

At-a-Glance Comparison


Using the Child/Elder Care Spending Account	Using the Tax Credit
Minimum contribution is $240 a year Maximum contribution is $5,000 a year ($2,500 if married and filing separately) regardless of the number of eligible dependents These amounts may be lowered to comply with certain Internal Revenue Service (IRS) nondiscrimination tests Contributions reduce your taxable income Contributions are free from Social Security taxes No need to itemize tax return Must decide contribution amount before expenses are incurred and forfeit unused amounts	No minimum expense for using credit Maximum expense applicable toward credit is $3,000 in 2008 for one dependent; $6,000 in 2008 for two or more dependents A percentage of expenses is applied as credit against taxes owed Credit does not reduce Social Security taxes Must itemize tax return No risk of "forfeiture"; credit is determined at end of year after expenses are incurred