Alongside his colleague Kirsten Gillibrand (D-NY), Sen. Richard Burr (R-NC) reintroduced the Child and Dependent Care FSA Enhancement Act on Wednesday.
The legislation is designed to strengthen dependent care flexible spending accounts (FSAs) by increasing pre-tax deposit limits from $5,000 to $7,500. The bill also correlates the limit to inflation, so that the accounts can grow at the same rate as the cost of child care.
“As any working parent knows in this economy, affordable child care is difficult to find,” Burr said. “This bill is one way to help American families stretch their dollars further in meeting their dependent care needs, whether it’s for their kids or their elderly parents. The cost of child care is increasing; and by increasing the amount Americans can put into a dependent care FSA and indexing it to inflation, we will help ensure that these accounts continue to be a meaningful option for families.”
Currently, dependent care FSAs permit employees to exclude up to $5,000 from their gross-income to assist with expenses associated with child care or adult dependent care; however, a caveat with this program exists.
Since the $5,000 cap is not indexed to inflation, families are unable to keep pace with the rising costs of care. Increasing the pre-tax limit and indexing it to inflation allows families to stretch their dollars further without reducing the quality of care.
“New York is the least affordable state in the nation when it comes to childcare, which now rivals the cost of sending children to college,” Gillibrand said. “For many families, both parents working, or a single mom going to work to provide for her family isn’t a choice. This bill is a step in the right direction as we work to ease the tax burden for families and help them stretch their dollars further to better meet the demands of paying for care for their child or aging parent.”