WASHINGTON – Today, U.S. Representatives Adrian Smith (R-NE), Danny K. Davis (D-IL), and Nathaniel Moran (R-TX) introduced bipartisan legislation to empower small businesses to offer dependent care flexible spending accounts (DCFSAs) to their employees.
The Small Business Dependent Care FSA Opportunity Act would create a tax credit for small businesses to assist with the startup and administrative costs of establishing DCFSAs, making it easier for them to provide child care benefits to working families.
“Small businesses are the backbone of communities across the nation, and their ability to thrive depends on attracting and retaining talented employees. Yet the startup and administrative costs make providing competitive benefits challenging. Our bipartisan bill will empower small businesses to offer DCFSAs, easing the financial burden of child care for working families while helping these businesses remain competitive in today’s hiring landscape. I am proud to lead this effort and look forward to working with my colleagues to turn this commonsense legislation into law,” said Smith.
“The tax code is an important part of a comprehensive federal effort to help families struggling with the high cost of child care. I am happy to work with my colleagues to assist the millions of employees who work for small businesses in accessing the dependent care flexible spending accounts by offsetting the program start-up costs for these small businesses. This change will work together with essential child care grants and child care tax credits to give a tax break to families to help them thrive,” said Davis.
“A key Republican priority during the 119th Congress has been serving working families and empowering small businesses. I am proud to co-lead this bill with Rep. Smith (NE) and Rep. Davis (IL). When we can get government out of the way and encourage small businesses to support their employees, we help ensure that hardworking Americans can keep their jobs while raising a family,” said Moran. “As a father of four and a former small business owner, I understand the value of making it easier for small businesses to remain competitive when hiring by offering child-care benefits. This legislation helps do exactly that by reducing the startup costs for employers who want to provide dependent care Flexible Spending Accounts (FSAs) to their employees. That’s good for working families, and it helps small businesses attract and retain the talented workers they need to grow.”
BACKGROUND:
DCFSAs allow employees to set aside pre-tax income to pay for eligible child care and dependent expenses, including daycare and after-school care. Due to startup and administrative costs, only 29 percent of employees at businesses with fewer than 100 employees have access to a DCFSA, compared with 63 percent of employees at larger businesses.
The Small Business Dependent Care FSA Opportunity Act would incentivize small businesses to offer DCFSAs to their employees by:
- Creating a tax credit for small businesses with 100 or fewer employees earning at least $5,000 annually to establish and administer DCFSAs.
- Covering the startup and administrative costs, as well as employee education about the benefit.
- Providing a credit of up to $250 per non-highly compensated employee.
- Setting a minimum credit of $500 and a maximum credit of $5,000 per year.
- Allowing employers to claim the credit for the first three years they offer a DCFSA plan.
Click here to view the text of the bill.
