Fluctuation in Earnings

Some parents’ earnings fluctuate throughout the year, and the Lead Agency must take this into account at eligibility determination and redetermination. As stated on the Office of Child Care’s Final Rule Frequently Asked Questions web page,

This is particularly important for families who rely on work that is unpredictable or seasonal in nature, such as agriculture or construction work or work associated with tourism industries. These families may experience a temporary spike in income due to working increased hours (e.g., retail at the holidays, tourism in summer) over a short period, yet those earnings are not representative of the family’s income over the course of a year. States will have to demonstrate in their plan how their initial determination and redetermination processes take into account irregular fluctuations in earnings.

The methodology by which states capture family income determines the accuracy of the eligibility determination (or re-determination) with implications for eligibility as well as the amount of co-pay for which a family may be responsible. The following are some examples of policy options that would enable states to take into account irregular fluctuations in earnings and capture a more nuanced picture of family income:

  • Average Income: To ensure that salary and wage information is reflective of annual income, a state has the option of averaging the family earnings over a period of time (e.g., looking at the family’s earnings over a 12 month period, rather than a shorter period of time). States adopting this approach will need to consider how income changes that occur during the eligibility period should be considered, including situations in which a family may be expected to have monthly income above 85 percent of SMI for part of the year and much lower income in other months. States have the flexibility to allow such families to remain eligible for child care subsidies during their higher earning months based on past evidence that annual income is not expected to be above the 85 percent SMI standard. Considering a family’s likely income over a year gives the state the ability to account for irregular fluctuations in pay over the course of a year and provide a more accurate picture of the family’s financial situation.

  • Allow for Temporary Income Increases: states can adopt policies that ensure that temporary changes in income, including temporary changes that mean that monthly income exceeds 85 percent of SMI (calculated on a monthly basis), do not affect eligibility or copayments. If a family temporarily sees its income rise but that change is not expected to be long-lasting, terminating eligibility or abruptly increasing copayments can de-stabilize the family and result in the family being left without needed assistance when the short-lived income increase has ended and the parent needs assistance to continue to work. [1]


[1]Office of Child Care. (2016). Child Care and Development Fund final rule frequently asked questions. U.S. Department of Health and Human Services, Administration for Children and Families. https://www.acf.hhs.gov/occ/faq/child-care-and-development-fund-final-rule-frequently-asked-questions