Child Care Flex Spending Act Would Raise Limit for Tax-Free Flex Spending Accounts to Offset Child Care Costs

WASHINGTON—U.S. Senator Chris Murphy (D-Conn.), a member of the U.S. Senate Health, Education, Labor and Pensions (HELP) Committee, along with U.S. Representative Rosa DeLauro (CT-03), Chair of the U.S. House of Representatives Appropriations Subcommittee on Labor, Health and Human Services, and Education, on Tuesday introduced legislation that would double the current $5,000 limit that employees can set aside tax-free to help offset child care costs. The Child Care Flex Spending Act would allow any employee who makes less than $150,000 annually to set aside up to $10,000, pre-taxes, each year to help pay for child care, and the benefit would be adjusted for inflation over time. Child care on average costs $15,000 annually.

In Connecticut, married families are currently spending around 13 percent of their annual income on childcare and single parents are spending almost half. In most states, including Connecticut, center-based infant care costs more than tuition at a public university. The Child Care Flex Spending Act is supported by the Children Action Network, Child Care Aware, First Five Years Fund, and First Focus.

Families across Connecticut are already struggling to pay their bills, and the exorbitant cost of quality child care makes things that much more difficult,” said Murphy. “Our legislation is a small fix to help families afford this vital necessity by doubling the amount of pre-tax money they can set aside in a flexible spending account.”

“The biggest economic challenge of our time is that working families are in jobs that do not pay them enough to live on. They are struggling to keep up with the rising cost of necessities like child care, healthcare, prescription drugs, housing, college education, and the list goes on,” said Congresswoman DeLauro. “Congress needs to help working families get ahead, and we can do that by helping them gain access to quality, affordable child care. The accounts that allow families to set aside up to $5,000 tax-free to help pay for child care costs are extraordinarily helpful—but this $5,000 cap has not kept pace with rising costs. That is why we need the Child Care Flex Spending Act, which doubles that cap to $10,000. I am proud to introduce this bill with Senator Murphy.”

Since 1981, Congress has allowed employers to provide to their employees flexible spending accounts, which can include the option of setting aside money tax-free to pay for dependent care needs. In 1986, these accounts were capped at $5,000 but not indexed to inflation, meaning their value now lags far behind the actual cost of child care. Murphy and DeLauro teamed up to introduce this legislation in 2013 after Murphy authored a report looking at child care costs in Connecticut. Murphy offered an amendment in 2014 as part of the Child Care and Development Block Grant Reauthorization Act that sought to make child care more affordable for American families.