State:

National
Reliable, quality child care is a major concern to many employees. Recent studies show that in 2009 there were 34.8 million families with children in the United States, and 44 percent of those families had children under the age of 18 (U.S. Bureau of Labor Statistics). In families maintained by women, nearly 68 percent of all mothers were employed. In families maintained by men, over 77 percent of all fathers were in the labor force. In 59 percent of married-couple families with children, both parents were employed.
In light of these numbers, it is not surprising that national studies have shown that employers that provide some form of childcare assistance experience increased worker productivity, improved job satisfaction and employee morale, heightened success in recruitment efforts, and reductions in absenteeism and turnover.
Employers covered under the federal Family and Medical Leave Act (FMLA) must provide up to 12 weeks of job-protected leave to employees for the birth of a child, the placement of a child with the employee for adoption or for foster care, or for the care of a child with a serious health condition. Some state laws provide greater leave rights for employees. Employers covered by both FMLA and state law must ensure that employees receive the full benefit of both. Please see the national Leave of Absence section.
Please see the state Leave of Absence section.
Employers that are interested in providing child care directly can consider a variety of options.
Full service on-site care. In a recent BLR® Survey, 4 percent of employers answered that they provided on-site childcare facilities. For hospitals and other round-the-clock employers, on-site care may solve staffing problems because it can provide night workers with a solution to the often daunting problem of finding child care at a time most daycare centers are closed. For education institutions, on-site child care often serves as a valuable teaching resource that can be kept cost-effective through the use of student interns as staff.
Employer-funded off-site care and consortium care. Employers that are not prepared to operate an on-site center may wish to consider funding off-site day care either alone or in consortium with other area employers. This may be an attractive option for employers located near an existing daycare center or employers in large office buildings and industrial parks who can pool their resources in a single center. Typically, employers that fund a daycare center receive a set number of daycare “slots” in return for their financial assistance. Funding, rather than self-operating, a daycare center may also eliminate potential liability concerns.
Summer camps. Employer-supported summer camps offer extended hours to cover the full workday (rather than the 9 a.m. to 3 p.m. day that is standard at most summer camps). Because of employer subsidies, these camps may be a less expensive option for employees. Employers that fund summer camps often work through local schools or civic organizations. This option may help employees with school age children who need to find care during the summer months. Some employers also view summer camp funding as a relatively low-cost option with high public relations potential.
Backup day care. Some employers provide access to childcare services that employees can use on an occasional basis to fill unexpected gaps in care. Although employees still need to have daycare arrangements in place, having a “drop-in center” where parents can bring a child when a caregiver calls in sick or when schools close unexpectedly can dramatically reduce absenteeism. Some employers subsidize the backup programs and require employees to pay for a portion of the service, while other employers provide employees with a predetermined allotment of days per year to use a backup care free of charge.
Sick child day care. Some employers offer employees an option to use a sick child daycare center when regular daycare services cannot be used because a child is mildly ill. These centers are staffed by a registered nurse and other staff members who are certified in pediatric first aid and cardiopulmonary resuscitation. For more information, contact:
The National Association for Sick Child Daycare
1716 5th Avenue
North Birmingham, AL 35203
205-324-8447
Recent BLR survey results indicate that 36 percent of employers offer flexible hours to assist employees with caregiving responsibilities (see http://hr.blr.com/surveys).Employers that allow employees the option of flexible hours typically permit employees to begin their workdays earlier or later to ease scheduling problems for employees with caregiver responsibilities, avoid "rush hour" commuting times, and otherwise provide the benefits of flexible hours. Telecommuting or a combination of flexible work hours with telecommuting can also help employees who have caregiver responsibilities for a young child, an elderly parent, or a family member with a disability. Employers often offer flexible programs to all employees rather than limiting flexibility to employees with family responsibilities. Flexible programs are used by many employers as a tool for recruiting and retaining employees.
Employers are eligible to receive a tax credit equal to 25 percent of qualified expenses for employee child care and 10 percent of qualified childcare resource and referral services during the tax year. The maximum total credit that may be claimed by a taxpayer is $150,000 per taxable year (26 USC Sec. 45F).
Note: The tax credit is part of the amendments made by Economic Growth and Tax Relief Reconciliation Act of 2001 that are due to expire at the end of 2010. If the tax credit is not extended, it will not apply to taxable, plan, or limitation years beginning after December 31, 2010.
Qualified childcare expenses. Qualified childcare expenses include costs paid or incurred:
• To acquire, construct, rehabilitate, or expand property that is to be used as part of the employer's qualified childcare facility;
• For the operation of the employer's childcare facility, including the costs of training and certain compensation for employees of the childcare facility, and scholarship programs; or
• Under a contract with a qualified childcare facility to provide childcare services to employees of the employer.
Qualified childcare resource and referral expenditures. Qualified childcare resource and referral expenditures are amounts paid or incurred under a contract to provide childcare resource and referral services to employees of the taxpayers. Eligibility for use of services must not discriminate in favor of highly compensated employees.
Perhaps the most popular option with employers, financial childcare assistance to employees usually takes the form of a “flexible spending account” (FSA) for childcare expenses. These programs allow the employer to set aside a specific amount (opted for and determined by the employee) from the employee's pretax pay. The employee may then reimburse himself or herself for childcare expenses from the set-aside funds. Under Internal Revenue Code Sec. 129, employees may set aside up to $5,000 per year, tax free, for eligible childcare expenses. Unless the plan provides otherwise, all deferred funds must be used during the tax year in which they are set aside, or they will be forfeited. Note: Dependent care FSAs are not affected by the healthcare reform laws that place contribution limits on healthcare FSAs. The $5,000 contribution limit for dependent care FSAs will continue.
Grace period. The IRS has modified its long-standing rule that a reimbursable expense must have been incurred during the plan year during which the employee contributed the funds to a childcare FSA (IRS Notice 2005-42). An FSA may be amended to allow a 2-month-and-15-day grace period following the end of the plan year during which a participant who has unused contributions from the just ended plan year, and who incurs qualifying expenses during the grace period, may be reimbursed for those expenses from the unused contributions as if the expenses had been incurred in the immediately preceding plan year. The effect of the grace period is that a participant may have as long as 14 months and 15 days to use benefits or contributions for a plan year before those amounts are forfeited under the use-it-or-lose-it rule that applies to childcare expense reimbursement plans. An employer may adopt a grace period for current plan year (and subsequent plan years) by amending the plan document before the end of the current year.
Flexible spending plans are popular because they involve minimal start-up costs and provide tax advantages to both the employer and the employee. Please see the national Flexible Benefits/Cafeteria Plans section.
Childcare tax credit. As an alternative to a flexible spending account, employees may be entitled to a tax credit for expenses paid to care for a child or a dependent so that the individual could work (26 USC Sec. 21). This credit is available to people who, in order to work or to look for work, have to pay for childcare services for dependents under the age of 13. The credit is also available for expenses to care for a spouse or a dependent of any age who is physically or mentally incapable of self-care. The credit can range from 20 to 35 percent (depending on income) of up to $3,000 of the expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals. These dollar limits must be reduced by the amount of any dependent care benefits provided by an employer that are excluded from taxable income. Taking a tax credit instead of excluding expenses from income generally benefits lower income employees who may owe little or no income tax even without the income exclusion.
Note: The tax credit is part of the amendments made by Economic Growth and Tax Relief Reconciliation Act of 2001 that are due to expire at the end of 2010. If the tax credit is not extended, it will not apply to taxable, plan, or limitation years beginning after December 31, 2010.
Determining the best childcare option and then finding a quality childcare facility at affordable cost can be a very stressful task for employees. Referral services, both in-house and run by community agencies, can provide a valuable service at a minimal cost.
Bulletin boards/Websites. One of the simplest and least expensive options for employers is providing a bulletin board or a site on the company's in-house intranet or e-mail server. The employer can use this facility to post information about any flexible spending plan options or other childcare-related solutions available to employees. In addition, prospective daycare providers can post listings, and employees can network with these providers or with other employees to work out daycare sharing arrangements (sometimes called family daycare networks).
Referral and placement services. Some employers with larger staffs and hours of operation that do not mesh with the 9-to-5 schedule of most daycare centers may consider implementing an active referral service to collect information on available providers and work with employees to find a viable placement. Such services are available on a contract basis from a number of sources, or the employer may create a position for an in-house referral provider.
Remote monitoring. Worry about how a child is being cared for can be a major distraction for employees. To address this, some daycare facilities have begun to offer parents the ability to monitor their child's care through video transmissions broadcast over the Internet. The employee, sitting at his or her computer, can then check up on a child as often as desired. Employers can foster a family friendly image by allowing reasonable use of office time and computers during the workday for daycare “checkups.”
A number of governmental, nonprofit, and for-profit organizations provide referral and accreditation information on childcare providers. These include the National Association of Child Care Resource and Referral Agencies at 703-341-4100 or on the Internet at http://www.naccrra.org; and the National Network for Child Care on the Internet at http://www.nncc.org.
Related Topics:
National
Reliable, quality child care is a major concern to many employees. Recent studies show that in 2009 there were 34.8 million families with children in the United States, and 44 percent of those families had children under the age of 18 (U.S. Bureau of Labor Statistics). In families maintained by women, nearly 68 percent of all mothers were employed. In families maintained by men, over 77 percent of all fathers were in the labor force. In 59 percent of married-couple families with children, both parents were employed.
In light of these numbers, it is not surprising that national studies have shown that employers that provide some form of childcare assistance experience increased worker productivity, improved job satisfaction and employee morale, heightened success in recruitment efforts, and reductions in absenteeism and turnover.
Employers covered under the federal Family and Medical Leave Act (FMLA) must provide up to 12 weeks of job-protected leave to employees for the birth of a child, the placement of a child with the employee for adoption or for foster care, or for the care of a child with a serious health condition. Some state laws provide greater leave rights for employees. Employers covered by both FMLA and state law must ensure that employees receive the full benefit of both. Please see the national Leave of Absence section.
Please see the state Leave of Absence section.
Employers that are interested in providing child care directly can consider a variety of options.
Full service on-site care. In a recent BLR® Survey, 4 percent of employers answered that they provided on-site childcare facilities. For hospitals and other round-the-clock employers, on-site care may solve staffing problems because it can provide night workers with a solution to the often daunting problem of finding child care at a time most daycare centers are closed. For education institutions, on-site child care often serves as a valuable teaching resource that can be kept cost-effective through the use of student interns as staff.
Employer-funded off-site care and consortium care. Employers that are not prepared to operate an on-site center may wish to consider funding off-site day care either alone or in consortium with other area employers. This may be an attractive option for employers located near an existing daycare center or employers in large office buildings and industrial parks who can pool their resources in a single center. Typically, employers that fund a daycare center receive a set number of daycare “slots” in return for their financial assistance. Funding, rather than self-operating, a daycare center may also eliminate potential liability concerns.
Summer camps. Employer-supported summer camps offer extended hours to cover the full workday (rather than the 9 a.m. to 3 p.m. day that is standard at most summer camps). Because of employer subsidies, these camps may be a less expensive option for employees. Employers that fund summer camps often work through local schools or civic organizations. This option may help employees with school age children who need to find care during the summer months. Some employers also view summer camp funding as a relatively low-cost option with high public relations potential.
Backup day care. Some employers provide access to childcare services that employees can use on an occasional basis to fill unexpected gaps in care. Although employees still need to have daycare arrangements in place, having a “drop-in center” where parents can bring a child when a caregiver calls in sick or when schools close unexpectedly can dramatically reduce absenteeism. Some employers subsidize the backup programs and require employees to pay for a portion of the service, while other employers provide employees with a predetermined allotment of days per year to use a backup care free of charge.
Sick child day care. Some employers offer employees an option to use a sick child daycare center when regular daycare services cannot be used because a child is mildly ill. These centers are staffed by a registered nurse and other staff members who are certified in pediatric first aid and cardiopulmonary resuscitation. For more information, contact:
The National Association for Sick Child Daycare
1716 5th Avenue
North Birmingham, AL 35203
205-324-8447
Recent BLR survey results indicate that 36 percent of employers offer flexible hours to assist employees with caregiving responsibilities (see http://hr.blr.com/surveys).Employers that allow employees the option of flexible hours typically permit employees to begin their workdays earlier or later to ease scheduling problems for employees with caregiver responsibilities, avoid "rush hour" commuting times, and otherwise provide the benefits of flexible hours. Telecommuting or a combination of flexible work hours with telecommuting can also help employees who have caregiver responsibilities for a young child, an elderly parent, or a family member with a disability. Employers often offer flexible programs to all employees rather than limiting flexibility to employees with family responsibilities. Flexible programs are used by many employers as a tool for recruiting and retaining employees.
Employers are eligible to receive a tax credit equal to 25 percent of qualified expenses for employee child care and 10 percent of qualified childcare resource and referral services during the tax year. The maximum total credit that may be claimed by a taxpayer is $150,000 per taxable year (26 USC Sec. 45F).
Note: The tax credit is part of the amendments made by Economic Growth and Tax Relief Reconciliation Act of 2001 that are due to expire at the end of 2010. If the tax credit is not extended, it will not apply to taxable, plan, or limitation years beginning after December 31, 2010.
Qualified childcare expenses. Qualified childcare expenses include costs paid or incurred:
• To acquire, construct, rehabilitate, or expand property that is to be used as part of the employer's qualified childcare facility;
• For the operation of the employer's childcare facility, including the costs of training and certain compensation for employees of the childcare facility, and scholarship programs; or
• Under a contract with a qualified childcare facility to provide childcare services to employees of the employer.
Qualified childcare resource and referral expenditures. Qualified childcare resource and referral expenditures are amounts paid or incurred under a contract to provide childcare resource and referral services to employees of the taxpayers. Eligibility for use of services must not discriminate in favor of highly compensated employees.
Perhaps the most popular option with employers, financial childcare assistance to employees usually takes the form of a “flexible spending account” (FSA) for childcare expenses. These programs allow the employer to set aside a specific amount (opted for and determined by the employee) from the employee's pretax pay. The employee may then reimburse himself or herself for childcare expenses from the set-aside funds. Under Internal Revenue Code Sec. 129, employees may set aside up to $5,000 per year, tax free, for eligible childcare expenses. Unless the plan provides otherwise, all deferred funds must be used during the tax year in which they are set aside, or they will be forfeited. Note: Dependent care FSAs are not affected by the healthcare reform laws that place contribution limits on healthcare FSAs. The $5,000 contribution limit for dependent care FSAs will continue.
Grace period. The IRS has modified its long-standing rule that a reimbursable expense must have been incurred during the plan year during which the employee contributed the funds to a childcare FSA (IRS Notice 2005-42). An FSA may be amended to allow a 2-month-and-15-day grace period following the end of the plan year during which a participant who has unused contributions from the just ended plan year, and who incurs qualifying expenses during the grace period, may be reimbursed for those expenses from the unused contributions as if the expenses had been incurred in the immediately preceding plan year. The effect of the grace period is that a participant may have as long as 14 months and 15 days to use benefits or contributions for a plan year before those amounts are forfeited under the use-it-or-lose-it rule that applies to childcare expense reimbursement plans. An employer may adopt a grace period for current plan year (and subsequent plan years) by amending the plan document before the end of the current year.
Flexible spending plans are popular because they involve minimal start-up costs and provide tax advantages to both the employer and the employee. Please see the national Flexible Benefits/Cafeteria Plans section.
Childcare tax credit. As an alternative to a flexible spending account, employees may be entitled to a tax credit for expenses paid to care for a child or a dependent so that the individual could work (26 USC Sec. 21). This credit is available to people who, in order to work or to look for work, have to pay for childcare services for dependents under the age of 13. The credit is also available for expenses to care for a spouse or a dependent of any age who is physically or mentally incapable of self-care. The credit can range from 20 to 35 percent (depending on income) of up to $3,000 of the expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals. These dollar limits must be reduced by the amount of any dependent care benefits provided by an employer that are excluded from taxable income. Taking a tax credit instead of excluding expenses from income generally benefits lower income employees who may owe little or no income tax even without the income exclusion.
Note: The tax credit is part of the amendments made by Economic Growth and Tax Relief Reconciliation Act of 2001 that are due to expire at the end of 2010. If the tax credit is not extended, it will not apply to taxable, plan, or limitation years beginning after December 31, 2010.
Determining the best childcare option and then finding a quality childcare facility at affordable cost can be a very stressful task for employees. Referral services, both in-house and run by community agencies, can provide a valuable service at a minimal cost.
Bulletin boards/Websites. One of the simplest and least expensive options for employers is providing a bulletin board or a site on the company's in-house intranet or e-mail server. The employer can use this facility to post information about any flexible spending plan options or other childcare-related solutions available to employees. In addition, prospective daycare providers can post listings, and employees can network with these providers or with other employees to work out daycare sharing arrangements (sometimes called family daycare networks).
Referral and placement services. Some employers with larger staffs and hours of operation that do not mesh with the 9-to-5 schedule of most daycare centers may consider implementing an active referral service to collect information on available providers and work with employees to find a viable placement. Such services are available on a contract basis from a number of sources, or the employer may create a position for an in-house referral provider.
Remote monitoring. Worry about how a child is being cared for can be a major distraction for employees. To address this, some daycare facilities have begun to offer parents the ability to monitor their child's care through video transmissions broadcast over the Internet. The employee, sitting at his or her computer, can then check up on a child as often as desired. Employers can foster a family friendly image by allowing reasonable use of office time and computers during the workday for daycare “checkups.”
A number of governmental, nonprofit, and for-profit organizations provide referral and accreditation information on childcare providers. These include the National Association of Child Care Resource and Referral Agencies at 703-341-4100 or on the Internet at http://www.naccrra.org; and the National Network for Child Care on the Internet at http://www.nncc.org.
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