Axne, Ernst Introduce Bipartisan Legislation to Help Iowa Families Keep Up with Rising Child Care Costs

March 23, 2021
Press Release

Today, Rep. Cindy Axne (IA-03) and Sen. Joni Ernst (R-IA) introduced bipartisan legislation, the Improving Child Care for Working Families Act, to expand Iowa families’ ability to pay for child care expenses. 

The legislation, co-led with Rep. Brian Fitzpatrick (PA-01) and Sens. Maggie Hassan (D-NH), Thom Tills (R-NC), and Kyrsten Sinema (D-AZ), would more than double the amount of money families can place in dependent care assistance plans (DCAPs) to allow families to keep up with the rising cost of child care.

The Improving Child Care for Working Families Act would permanently increase the cap on how much families can place in their DCAPs to $10,500 in order to cover the current costs of child care. The DCAP contribution limit was recently raised to $10,500 as part of the American Rescue Plan, but this change only applies for 2021.

“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 the 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.”

“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 small businesses and working moms and dads—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 Sen. Ernst.

“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.”

“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." 

The legislation was introduced today with Reps. Salud Carbajal (CA-24), Steve Cohen (TN-09), Josh Harder (CA-10), Ashley Hinson (IA-01), Sara Jacobs (CA-53), Stephen Lynch (MA-08), Albio Sires (NJ-08), Paul D. Tonko (NY-20), and Susan Wild (PA-07).

Employers offer DCAPs, a type of flexible spending account, to give parents the ability to set aside pretax income for child care and other qualifying dependent care expenses.

For 2021, the temporary contribution limit is $10,500. However, the permanent contribution limit, set at $5,000, has not changed since the Internal Revenue Service first set it in 1986. Child care costs have risen consistently over recent years, and the average cost for infant care in Iowa is $865 per month – just over $10,000 per year.

According to the Economic Policy Institute, infant care in Iowa cost 18% more per year than in-state tuition for a four-year public college. Care also costs 12% more than average rent in Iowa.

This legislation will expand families’ potential savings through these accounts, allowing them to better afford the cost of child care at no cost to employees or employers who utilize DCAPs.

Rep. Axne also worked last year to preserve unused savings in DCAP accounts for families who weren’t able to access care during the COVID-19 pandemic.

A provision championed by Rep. Axne to allow unused 2020 savings to roll over to 2021 was included in the COVID-19 relief deal signed into law in December.

Support for the Improving Child Care for Working Families Act

The legislation has been endorsed by Bipartisan Policy Center, Save the Children Action Network, Early Care and Education Consortium, Employers Council on Flexible Compensation, National Taxpayers Union, HealthEquity, Exceptional Persons Inc., Iowa Primary Care Association, Iowa Association of Business and Industry, Iowa Women's Foundation, and Black Hawk County Child Care Coalition.

"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  

“The gap in access to high-quality child care has become particularly acute amid the ongoing COVID-19 pandemic,” said Radha Mohan, Executive Director of the Early Care and Education Consortium. “Child care costs continue to rise, while labor force participation, particularly amongst women, continues to drop. Doubling the cap on how much families can place in their DCAPs, as the Improving Child Care for Working Families Act proposes, is one way to get at both of these problems. The current limit of $5,000 has not changed in over 35 years, meanwhile, infants can cost single-parent families an average of 36% of household income. In some states, the annual cost of infant care is well over $16,000. This is unsustainable. No parent should have to choose between work and sending their child to high-quality child care.”

"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 Taxpayers Union

“Childcare affordability is a central issue for working families and our communities. We know that the availability of quality childcare leads to more economic opportunity for parents and better overall health for children,” said Aaron Todd, CEO of the Iowa Primary Care Association. “Increasing the cap during COVID-19 is a major win for working families but we know that this hardship was facing Iowa families pre-pandemic and will be with us post-pandemic. The Iowa Primary Care Association is grateful that Representative Axne and Senator Ernst are working together to make this vital change permanent.”

“The Iowa Association of Business and Industry has heard from employers across the state for the last several years about the need for child care solutions for Iowa’s working families. The pandemic only exacerbated the need for more support for child care providers and working families with young children. Thank you to Senator Ernst and Congresswoman Axne for introducing the Improving Child Care for Working Families Act. The increase for employers and employees to the dependent care assistance plans has been much needed for many years and will help address a critical workforce need and support the cost of child care for Iowa families. When Iowa families are supported, everyone succeeds,”  said Nicole Crain, Executive Vice President, Iowa Association of Business and Industry

“If you want to make child care more accessible and affordable for working Iowans, increasing the amount of tax-free contributions allowed for DCAPs is one of the easiest and most effective ways to do that. With this one, simple change, we can alleviate some of the financial burden around child care, and in turn, boost workforce participation at a time when parents (and especially women) are exiting the workforce at alarming rates. The Improving Child Care for Working Families Act is a win for ALL working parents—male or female, urban or rural. And it’s a win for Iowa businesses. IWF is optimistic that with Senator Ernst and Rep. Axne’s leadership in this arena, we’ll continue to see progress on this all-too-important issue,” said Dawn Wiand, President and CEO, Iowa Women’s Foundation

“Save the Children Action Network (SCAN) is excited to see the Improving Child Care for Working Families Act reintroduced, aiming to make high-quality child care more affordable for American families. As COVID-19 has illustrated, the child care industry is not only essential to kids, but also to parents and our economic recovery,” said Roy Chrobocinski, Save the Children Action Network (SCAN) Director of Federal Government Relations. “That’s why we applaud Representative Axne and Senator Ernst for reintroducing this bipartisan bill, and for continuing to champion robust investment in the child care industry.”