Ernst, Hassan Lead Bipartisan, Bicameral Effort to Increase Access to Child Care for Working Families
Senators Sinema and Tillis, along with Representatives Axne and Fitzpatrick, have also joined the bill that would increase the amount of tax-free dollars working families and their employers can set aside to use toward child and dependent care expenses.
Mar 23 2021
WASHINGTON—U.S. Senators Joni Ernst (R-Iowa) and Maggie Hassan (D-N.H.), along with Senators Kyrsten Sinema (D-Ariz.) and Thom Tillis (R-N.C.) and Representatives Cindy Axne (D-Iowa) and Brian Fitzpatrick (R-Pa.), are leading a bipartisan, bicameral effort to increase access to child care for working families in Iowa, New Hampshire, and across the country. The Improving Child Care For Working Families Act increases the amount of tax-free dollars working parents and their employers can set aside in a dependent care assistance plan (DCAP) to use toward child care expenses.
“We know that child care has long been an issue in states like Iowa, and across the country, which is why, even before this pandemic, I’ve worked across the aisle to address this crisis. This bipartisan bill is a commonsense solution that will benefit both our working moms and dads and small businesses—and has the support of many state and national organizations. I’m proud to join my colleagues in the House and Senate to put forward this proposal that will allow our working families and small businesses to use more of their hard-earned dollars, tax-free, to get their kiddos the best quality care possible,” said Senator Ernst.
“I’ve long heard from parents across New Hampshire about challenges that they face affording child care, and the COVID-19 pandemic has only underscored the need to take action on this pressing issue,” said Senator Hassan. “I am glad to partner with my colleagues in the House and Senate on this bipartisan bill that could make a difference for hard-working families’ bottom lines.”
“Hardworking Arizona families deserve access to affordable childcare. Our bipartisan solution permanently improves how Arizonans’ can save for child care to help working parents afford the costs of childcare and get ahead,” said Senator Sinema.
"The COVID-19 pandemic underscored why working moms and dads need readily-available, affordable child care that is safe for both children and staff," said Senator Tillis. "This legislation ensures children have access to a safe learning environment by permanently increasing the DCAP cap so that parents can set aside a larger amount of their pretax income to pay for child care."
“Access to child care will make the difference in keeping Iowa on a pathway to full economic recovery – but when the cost of care is higher than the average rent, families need help keeping up with skyrocketing costs,” said Rep. Axne. “I know how nerve-racking it can be as a new parent to have to budget for the rising costs of care every year – and I’m proud to introduce this commonsense legislation to give Iowa families the tools they need to afford the current cost of child care by updating existing solutions to reflect the realities of a modern family budget.”
“As we work to get our economy back on track, it is of the utmost importance that parents and working families can afford quality childcare. Yet, too many families in Pennsylvania and across our nation find themselves continuing to struggle with rising childcare costs," said Rep. Fitzpatrick. “Our bipartisan legislation will double the amount of pretax dollars that families can place in employer-sponsored dependent care assistance plans (DCAPs), therefore providing families with more options and financial tools to keep up with rising childcare costs.”
"Now more than ever, it is important to support our nation’s working families. Employers can support their employees’ child and dependent care needs by offering dependent care assistance plans, often in the form of flexible spending accounts. Unfortunately, for most families, the average cost of child care each year is much greater than the contribution limits under the program. The Bipartisan Policy Center thanks Senators Ernst (R-IA) and Hassan (D-NH) and Representatives Axne (D-IA) and Fitzpatrick (R-PA) for their work to increase the contribution limits for these plans, which will help more parents afford child care and ensure employers can better support their employees with caregiving needs. We are pleased to see the introduction of this bicameral, bipartisan legislation, and look forward to engaging on this important issue," said Linda Smith, Director, Bipartisan Policy Center’s Early Childhood Initiative.
"Congress first allowed parents to set aside their income for child care expenses on a tax-free basis in 1981, and it set the limit at $5,000 per family per year in 1986. The limit has been $5,000 ever since, even though child care costs have increased significantly in the past 35 years. It's long past time Congress lift the limit on tax-free dependent care assistance program (DCAP) contributions for working parents, and lawmakers took the first step toward doing so -- for the 2021 tax year alone -- by lifting the limit from $5,000 to $10,500 in the American Rescue Plan. National Taxpayers Union applauds Representative Axne and Senator Ernst for introducing the Improving Child Care for Working Families Act, which would make the new $10,500 DCAP limit permanent," said Andrew Lautz, Director of Federal Policy, National Taxpayer’s Union.
Even before the pandemic, child care was becoming increasingly expensive for families. In Iowa, for example, annual child care costs average $8,633 and infant care costs average $10,378. Nationwide, infant care is more expensive than tuition at a four-year public college in 33 states. COVID-19 has heightened the challenges families face when looking for affordable, quality child care. Many child care providers have had to shutter or reduce their enrollment. According to one estimate, Iowa child care costs have increased by 60% during the pandemic.
To address the rising costs of child care, families are increasingly making use of dependent care assistance plans (DCAPs), which allow working families and their employers to set aside tax-free dollars toward qualifying child and dependent care expenses. However, tax-free DCAP contributions have been limited to $5,000 annually since 1986, which only covers half the annual cost of child care today.
While the DCAP limit has been lifted to $10,500, this change only applies for 2021. This relief is an important first step, but families will continue to struggle with the cost of child care unless we offer lasting relief. That’s why the Improving Child Care for Working Families Act allows families to put more tax-free dollars toward child care by permanently raising the DCAP contribution limit to $10,500.
The Improving Child Care for Working Families Act is supported by the Bipartisan Policy Center, Save the Children Action Network, Early Care and Education Consortium, Employers Council on Flexible Compensation, National Taxpayers Union, HealthEquity, Iowa Primary Care Association, Iowa Association of Business and Industry, Iowa Women's Foundation, Black Hawk County Child Care Coalition and Exceptional Persons, Inc. (Child Care Resource and Referral of Northeast Iowa host agency).