New rules expand employee childcare subsidy benefit

Agencies that offer childcare subsidies to low-income employees can make advance payments directly to daycare centers, so that families don't have to pay up front, according to guidelines published Monday in the Federal Register.

The interim rules allows low-income families that can't afford to wait for reimbursement to participate in the program, according to Bonnie Storm, director of the Office of Work Life Programs at the Office of Personnel Management.

Since September 1999, federal agencies have been allowed to use appropriated funds to subsidize childcare for low-income workers. For the first two years, the new rules were temporary, allowing agencies to use pilot subsidy programs. The fiscal 2002 Treasury and Postal Appropriations Act, signed in November 2001, gave agencies permanent authority to establish childcare subsidy programs. Agencies can design their own subsidy programs and determine who is eligible.

According to the interim rules, agencies can offer subsidies to low-income workers who pay a family member to care for their children, or send their kids to a childcare program that meets state and federal safety standards. The childcare provider does not have to meet quality standards set forth by the National Association for the Education of Young Children, which accredits outstanding childcare centers, Storm said.

Although OPM believes federal workers should send their children to the highest quality childcare center possible, Storm said, only about 5 percent of all providers nationwide are accredited. OPM doesn't want agencies to think that their programs must be limited to this select group of providers, according to Storm.

Currently, there are 28 subsidy programs, and the Interior Department and Central Intelligence Agency have shown interest in offering subsidies soon, Storm said. Some of the larger departments run more than one program. The average subsidy recipient has an annual household income of about $30,000, according to Storm.

Steve Bauer, the executive director of the Federal Employee Education and Assistance Fund, a nonprofit organization that administers 17 of the 28 subsidy programs, said that the revised guidelines also allow agencies to help workers stationed overseas by subsidizing childcare at foreign daycare centers.

The State Department has expressed interest in providing such a benefit, he said. Offering a program that would subsidize childcare overseas would take some effort, Bauer said, because the department would have to show that such a program met health and safety standards equivalent to existing standards for programs operating in the United States. But the revised regulations pave the way for the State Department and other agencies to move ahead in developing subsidy programs that would apply overseas, he said.

The revised rules also allow children living in the United States whose parents are deployed overseas to benefit from the subsidies.

While the majority of the revisions serve to clarify existing policies, they are still important because they are the final step in implementing the 2001 legislation giving agencies permanent power to use appropriated funds for childcare subsidies, Storm said. Until now, agencies had been operating under the set of guidelines from March 2000.

Subsidy programs have become increasingly popular in the past two years, Bauer said. In fiscal 2003, the programs FEEA administers have given out more than $3 million in subsidies, he said, compared with $2.4 million in fiscal 2002, $1.6 million in fiscal 2001 and about $266,000 in fiscal 2000, the first year of the program.

He said he thinks agencies are less reluctant to offer the benefit now that they know it can be a permanent program, and not just a pilot project. Also, the guidelines are more flexible now that the programs can be permanent, Bauer said. For example, agencies could only use funds appropriated for salaries to run the pilot programs, but now they can use funds earmarked for other expenses as well.

The comment period for the interim rules on the childcare subsidy program ends May 23, 2003. Send comments by email to Bonnie Storm at or by mail to:

Office of Personnel Management
1900 E Street, N.W. Room 7315
Washington, D.C. 20415
Attention: Bonnie Storm

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