Working Families Assistance Act of 2004

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4372) to amend the Internal Revenue Code of 1986 to provide for the carryforward of $500 of unused benefits in cafeteria plans and flexible spending arrangements for dependent care assistance.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, families today shoulder tremendous financial burdens. The USDA's 2003 report estimates two-parent middle income families spend between $9,000 and $10,000 a year to raise one child. With 61 percent of working families relying on some form of child care, costs add up very quickly especially in families with more than one child. But it is not just child care expenses that families face. Many families have non-child dependents, including disabled parents or spouses living at home.

Dependent care accounts were created to assist families with two working parents to care for the young children or help these families who care for a disabled spouse or parent. These accounts allow up to $5,000 to be withheld pretax to help pay for this important care. Unfortunately, these accounts are not being utilized to their fullest extent. They were created in a use-it-or-lose-it fashion which often causes its users to underestimate the amount of money they need to put away, shortchanging the very people it was intended to help.

In 2002, the average contribution to these accounts was $3,024 with a net tax savings of $690, but this average contribution is almost $2,000 below the allowed contribution limit. The result is most families are missing out on almost 40 percent of the benefit.

Mr. Speaker, H.R. 4372, the Working Families Assistance Act, gives families peace of mind by allowing them the flexibility to roll over up to $500 of their money into the next year flexible savings account. So if you overestimated the amount you would spend on dependent care, you will now have a cushion to ensure your flexible spending account investment does not completely disappear.

The Working Families Assistance Act gives families the chance to realize the full tax benefit of this important program.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I appreciate the remarks of the gentleman from Maryland. I think this, again, is a tremendous step forward in giving working families the ability to project what their dependent care expenses would be for the upcoming year and then to give them some flexibility if they do not quite hit the mark, so to speak. And this provision, this legislation echoes what we have done in the health savings accounts arena a few weeks ago in this House.

Mr. Speaker, I yield 3 minutes to my colleague, the gentleman from Minnesota (Mr. Kennedy).

Mr. Speaker, I thank the gentleman from Minnesota (Mr. Kennedy) and the gentleman from Maryland (Mr. Cardin) for their remarks, and I yield back the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, let me thank my friend from Virginia for bringing forward this legislation which I support. I think it is a very important change in the flexible spending arrangements that are permitted under the Internal Revenue Code. And I thank the gentleman from Virginia (Mr. Cantor) for bringing forward this legislation.

Mr. Speaker, as my friend has indicated, this bill would permit a taxpayer to carry forward up to $500 of unused benefits in a dependent care flexible spending arrangement from one year to the next plan year. The flexible spending arrangements are a way that you can use pretax dollars to pay for expenses that are, according to what the policy makers have determined, areas that we want to encourage our constituents to be able to spend. This is in dependent care expenses, to take care of our children. This is certainly an area where it is becoming more and more difficult for working families to be able to afford dependent care for their children.

The flexible spending arrangements allow them to use pretax dollars in order to offer some help and assistance. The problem with the flexible spending arrangements is that you have to determine at the beginning of the year how much money you are going to spend for dependent care. If you are wrong and you put away too much money, you lose that money. That is certainly a pretty harsh penalty for misjudging the amount of money that you will need for dependent care. And, therefore, this bill would allow a taxpayer to roll over up to $500 from one tax year to another. And it certainly makes sense to make this modification in our Internal Revenue Code.

Mr. Speaker, I might point out though that I am disappointed that we are not doing more, not doing more for dependent care in our society. In the committee that I serve on, the Committee on Ways and Means, we have looked at authorizing additional day care aid to our states. In my own state of Maryland the only way that you can get assistance on dependent care is to go on to cash assistance welfare. That does not make a lot of sense.

Prior to a year ago, we were helping working poor in our state with dependent care from the state government using Federal assistance. Well, we have not increased that Federal assistance. I would urge us to consider increasing the amount of dollars made available for safe, affordable day care for our constituents.

In the meantime, Mr. Speaker, I do support H.R. 4372. It is a step in the right direction. And I would encourage my colleagues to accept this bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I rise today in strong support of the Working Families Assistance Act and would like to thank my friend from Virginia for taking the leadership role in this important piece of legislation.

We should be doing everything possible to make it easier for parents to raise their children. The Working Families Assistance Act does just that, by helping to ease the burdens of dependent care for hard working families. Currently, 22 percent of employers offer dependent care flexible savings accounts or FSAs to their employees.

Employees may take $2,500 individually or $5,000 per married couple, put it in that FSA to pay for dependent care. Dependents, for purposes of the FSA, are children under age 13 or individuals such as disabled parents who require full-time care due to physical or mental condition.

Parents can use the money in these accounts to pay for day care, nursery care, or even have an adult relative care for children; but only 14 percent of eligible families participate in these FSAs. Why? One of the big reasons is that, like the health care FSA, employees must forfeit any unused funds back to their employer at the end of the year.

The use-it-or-lose-it provision has made these accounts a bad fit for many families who are trying to create and keep a budget for the year; and for those who use dependent care FSAs, many families are forced to underestimate the amount of money they will need for the year so they do not lose money at the end of the year, essentially defeating the point of the account.

Recently, we passed legislation allowing hardworking families to carry over $500 from health FSAs. That is what we are doing here today for child and dependent care. The Working Family Assistance Act would fix that problem by allowing families to carry over

$500 into the next year's FSA. This change will give parents a safety net as they try to predict their family's dependent care costs.

This bill also gives parents more choices and more flexibility in meeting their family's needs. We should be taking every opportunity we can to let families keep and use their own money to raise their children.

I am pleased to be one of the sponsors of this legislation to help working families meet their dependent care needs. I urge my colleagues to support this legislation.

Mr. Speaker, I ask unanimous consent that all Members may have five legislative days within which to revise and extend their remarks and to include extraneous material on the subject of H.R. 4589 and H.R. 4372.