"Lower Income Federal Employee" Determination

How should agencies determine whether a Federal employee qualifies as a "lower income Federal employee" for the purposes of this legislation?

Each agency has the discretion to determine who qualifies as a “lower income Federal employee” in a way that makes sense for its agency. Agencies may choose a particular definition for one location or mission and a different definition at another location or mission.

There are several methods for determining eligibility under this law. This guide provides agencies with a variety of suggested models. Keep in mind that the regulations allow for maximum flexibility but the intent of the law specifying “lower income” must be respected. The intention is to allow agencies to determine what works best for them.

All of the suggested models in this document are based on the assumptions that:

1. A Federal employee’s eligibility for this program considers total family income (TFI). TFI is the combined income of both of the child’s parents/guardians and is listed on their IRS tax forms as their Adjusted Gross Income; and
2. The amount of subsidy will be reduced by any current State and/or local subsidy the parents/guardians currently receive; and
3. Employees must have submitted their earnings statements, verification of employment, and latest IRS 1040 or other relevant IRS tax forms to the administrators of the program for the purpose of verifying income.

Choosing an eligibility model involves:

1. Deciding whether to set a total family income (TFI) threshold amount, which establishes the highest amount of total family income that can be earned in a given year in order for a Federal employee to be eligible for the program. Obviously, setting that amount at a level that is very high or very low will greatly affect the population of employees who can benefit from this law. With some models, a threshold amount need not be set since the formula automatically disqualifies some employees because of the relationship between their TFI and their actual, expected child care costs.
2. Determining what amount of subsidy the agency will provide to a Federal employee. As you will see from the different models presented, the approach can vary from prescribing a set amount of subsidy, using a sliding scale model, to prescribing a sum that is based on a percentage of TFI or a percentage of child care costs. You should also decide whether your formula addresses all child care costs for a given family or whether assistance will be made on a per child basis. One model is based on the cost of care for each child on an individual basis, while the others are based on the total child care costs a family pays.

These decisions will have an impact, sometimes dramatic, on the amount of subsidy your employees will receive.

Not knowing the amount of spousal income a family has can make it difficult initially to predict how many employees will be eligible and, of those, how many will actually apply for subsidy. Most agencies have reported, thus far, that they initially overestimated both the number of eligible employees and the amount of funds the agencies would disburse. In several cases, agencies raised their TFI thresholds in order to provide assistance to a greater number of lower income employees.

Step 1: Choose a model that makes sense for your agency. Four of the five models presented here have a set TFI threshold, the upper limit that defines eligibility.
If a threshold is set, families with TFI above a certain threshold would not be eligible for subsidy. Setting a threshold generally makes it easier to understand eligibility. Families with income at or below the TFI threshold amount would be eligible for subsidy. Choose a model that is easy for your employees to understand, while at the same time, accomplishing your goals for the program.

Step 2: Decide on whether you want a model that factors in total child care costs.
Some models consider the total child care costs of the family in determining the amount of subsidy that will be awarded.
Others simply provide a flat fee that employees with more than one child can apply to whichever child’s care they wish. If an agency decides it wishes to consider a family’s total child care costs, it is easier to take that approach rather than use a model that provides a certain amount of subsidy based on the number of children in care.

Step 3: Determine the amount of subsidy employees can receive.
An important consideration is whether the model you choose results in an amount of subsidy that is adequate for an employee to use toward child care costs. For example, for lower income employees whose child care costs might be $6,000 annually, providing them with a reduction in child care costs of only $600 a year might not be adequate for them to utilize licensed child care. Some models provide the employee with a certain percentage of his or her child care costs (Model A) or expect the employee to pay a specified percent of TFI, with the agency paying the remainder (Model B and E).

Agencies may wish to change the numerical factors in a given model to increase or decrease the amount of subsidy an employee might receive.

Note: Although the guide discusses subsidy an employee might receive, the actual disbursement is generally made directly to the child care provider, thereby reducing the child care costs for the employee. Refer to the discussion under “Payments” in this Guide.