WASHINGTON, D.C. – Today, U.S. Senator Richard Burr (R-NC), along with Senators Mike Johanns (R-NE) and Kirsten Gillibrand (D-NY), introduced the Child and Dependent Care FSA Enhancement Act, a bill that strengthens dependent care flexible spending accounts (FSA) for American families by increasing the amount of pre-tax dollars that families can put into these accounts from $5,000 to $7,500. The bill will also index this new cap to inflation so that FSAs no longer erode in value over time as the cost of child care continues to increase.
“As any working parent knows, finding affordable day care options can be very difficult under even the best circumstances. This bill is one way to help many American families afford daycare, whether it’s for their kids or their elderly parents,” Senator Burr said. “The cost of child care is increasing, and by increasing the amount Americans can put into an FSA and indexing it to inflation, we will help ensure that these accounts continue to be a meaningful option for families.”
“This legislation gives working families greater flexibility and allows them to stretch their hard-earned dollars further as dependent care costs continue to increase," Senator Johanns said. "I'm pleased to support families across Nebraska and our nation by sponsoring this legislation.”
“In this difficult economy, parents are having a harder and harder time affording the rising cost of child care. Despite longer hours away from home, families’ incomes are just not keeping pace,” Senator Gillibrand said. “This legislation will help ease the burden on working families, and help make child care more affordable.”
Dependent care FSAs currently allow employees to exclude $5,000 from their gross-income to help them cover the expenses associated with child care or adult dependent care. This exclusion from gross income allows families to save money on income and FICA taxes. However, since the $5,000 cap is not indexed to inflation, families are falling more and more behind to the rising costs of care. Increasing the amount that can be excluded and indexing it to inflation would allow families to stretch their hard-earned dollars even further and will ensure that this type of care remains an option for families in North Carolina and across the country.
Currently, there are 458,857 children in North Carolina under the age of 6 needing child care as a result of working parents, and the average annual fees paid for full-time child care range from approximately $5,700 to over $8,500.