Yes, an employer may use a debit card to provide benefits under its dependent care assistance program, including a dependent care assistance flexible spending arrangement (FSA). However, dependent care expenses may not be reimbursed before the expenses are incurred. Thus, if a dependent care provider requires payment before the dependent care services are provided, the expenses cannot be reimbursed at the time of payment through use of a debit card or otherwise.

An employer offering a dependent care assistance FSA may adopt the following method to provide reimbursements for dependent care expenses through a debit card:

• At the beginning of the plan year or upon enrollment in the dependent care assistance program, the employee pays initial expenses to the dependent care provider and substantiates the initial expenses by submitting to the employer or plan administrator a statement from the dependent care provider substantiating the dates and amounts for the services provided;
• After the employer or plan administrator receives the substantiation (but not before the date the services are provided as indicated by the statement provided by the dependent care provider), the plan makes available through the debit card an amount equal to the lesser of:
• the previously incurred substantiated expense, or
• the employee's total salary reduction amount to date.
• The card may be used to pay for subsequently incurred dependent care expenses; and
• The amount available through the card may be increased in the amount of any additional dependent care expenses only after the additional expenses have been incurred.

Cite: IRS Proposed Reg. §1.125-6(g).