15366 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 

1Madowitz, M. et al. (2016). Calculating the 

Hidden Cost of Interrupting a Career for Child Care. 

Washington, DC: Center for American Progress. 

https://www.americanprogress.org/article/ 

calculating-the-hidden-cost-of-interrupting-acareer-for-child-care/. 

2National Survey of Early Care and Education 

Project Team (2022): E. Hardy, J.E. Park. 2019 

NSECE Snapshot: Child Care Cost Burden in U.S. 

Households with Children Under Age 5. OPRE 

Report No. 2022–05, Washington DC: Office of 

Planning, Research and Evaluation (OPRE), 

Administration for Children and Families (ACF), 

U.S. Department of Health and Human Services 

(HHS). https://www.acf.hhs.gov/opre/report/2019- 

nsece-snapshot-child-care-cost-burden-ushouseholds-children-under-age-5. 

3Landivar, L.C., Graf, N.L., & Rayo, G.A. (2023). 

Childcare prices in local areas: Initial findings from 

the national database of childcare prices. Women’s 

Bureau Issue Brief. U.S. Department of Labor, 

Washington, DC. Issued January. 

4Hill, Z., Bali, D., Gebhart, T., Schaefer, C., & 

Halle, T. (2021) Parents’ reasons for searching for 

care and results of search: An analysis using the 

Access Framework. OPRE Report #2021–39. 

Washington, DC: Office of Planning, Research, and 

Evaluation, Administration for Children and 

Families, U.S. Department of Health and Human 

Services. https://www.acf.hhs.gov/opre/report/ 

parents-reasons-searching-early-care-andeducation-and-results-search-analysis-using. 

5Unpublished FY 2021 ACF administrative data. 

6 Gault, B. and Reichlin Cruse, L. (2017). Access 

to Child Care Can Improve Student Parent 

Graduation Rates. Washington, DC: Institute for 

Women’s Policy Research. https://iwpr.org/iwprgeneral/access-to-child-care-can-improve-studentparent-graduation-rates/. 

7Herbst, C. (2022). ‘‘Child Care in the United 

States: Markets, Policy, and Evidence.’’ Journal of 

Policy Analysis and Management. https://doi.org/ 

10.1002/pam.22436.; Herbst, C., and E. Tekin, 2011. 

‘‘Do Child Care Subsidies Influence Single Mothers’ 

Decision to Invest in Human Capital? ’’ Economics 

of Education Review 30, no. 5: 901–12. https://

doi.org/10.1016/j.econedurev.2011.03.006. 

8Landivar, L.C., Graf, N.L., and Altamirano Rayo, 

G. (2023). Childcare Prices in Local Areas: Initial 

Findings from the National Database of Childcare 

Prices. Women’s Bureau Issue Brief. U.S. 

Department of Labor. https://www.dol.gov/sites/ 

dolgov/files/WB/NDCP/508_WB_IssueBrief-NDCP20230213.pdf. 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 98 

RIN 0970–AD02 

Improving Child Care Access, 

Affordability, and Stability in the Child 

Care and Development Fund (CCDF) 

AGENCY: Office of Child Care (OCC), 

Administration for Children and 

Families (ACF), Department of Health 

and Human Services (HHS). 

ACTION: Final rule. 

SUMMARY: This final rule makes 

regulatory changes to the Child Care and 

Development Fund (CCDF). These 

changes lower child care costs for 

families participating in CCDF, improve 

the program’s child care provider 

payment rates and practices, and 

simplify enrollment in the child care 

subsidy program. The final rule also 

includes technical and other changes to 

improve clarity and program 

implementation. 

DATES: Effective: April 30, 2024. 

Temporary Waivers: States and 

Territories that are not in compliance 

with the provisions of this final rule on 

the effective date may request a 

temporary waiver for an extension of up 

to two years if needed to come into 

compliance. For Tribal Lead Agencies, 

ACF will determine compliance through 

review and approval of the FY 2026– 

2028 Tribal CCDF Plans that become 

effective October 1, 2025. 

FOR FURTHER INFORMATION CONTACT: 

Megan Campbell, Office of Child Care, 

202–690–6499 or megan.campbell@

acf.hhs.gov. 

SUPPLEMENTARY INFORMATION: 

I. Statutory Authority

II. Background

III. Executive Summary

Effective Dates

Costs, benefits, and transfer impacts

Severability

IV. Development of Regulation

V. General Comments and Cross-Cutting

Issues

VI. Section-by-Section Discussion of

Comments and Regulatory

Provisions

Subpart A—Goals, Purposes, and 

Definitions 

Subpart B—General Application 

Procedures 

Subpart C—Eligibility for Services 

Subpart D—Program Operations 

(Child Care Services) Parental 

Rights and Responsibilities 

Subpart E—Program Operations 

(Child Care Services) Lead Agency 

and Provider Requirements 

Subpart F—Use of Child Care and 

Development Funds 

Subpart G—Financial Management 

Subpart H—Program Reporting 

Requirements 

Subpart I—Indian Tribes 

Subpart K—Error Rate Reporting 

VII. Regulatory Process Matters

Paperwork Reduction Act

Regulatory Flexibility Act

Unfunded Mandates Reform Act of

1995

Executive Order 13132

Assessment of Federal Regulations

and Policies on Families 

VIII. Regulatory Impact Analysis

List of Subjects in 45 CFR Part 98

I. Statutory Authority

This final rule is being issued under

the authority granted to the Secretary of 

Health and Human Services by the 

CCDBG Act of 1990, as amended (42 

U.S.C. 9857, et seq.), and section 418 of 

the Social Security Act (42 U.S.C. 618). 

II. Background

The Child Care and Development

Block Grant Act (CCDBG), hereafter 

referred to as the ‘‘Act’’ (42 U.S.C. 9857 

et seq.), together with section 418 of the 

Social Security Act (42 U.S.C. 618), 

authorize the Child Care and 

Development Fund (CCDF), which is the 

primary federal funding source devoted 

to supporting families with low incomes 

afford child care and to increasing the 

quality of child care for all children. 

CCDF plays a vital role in supporting 

child development and family wellbeing, facilitating parents’ employment, 

training, and education, and improving 

the economic well-being of participating 

families. Families with children under 

age 5 and incomes below the federal 

poverty line who pay for child care 

spend 36 percent of their income on 

child care on average, which leaves 

insufficient funding for food, housing, 

and other basic costs.1 Households with 

incomes just above the federal poverty 

level spend more than 20 percent of 

their income on child care, on average.2

Even school-age care can amount to 8 to 

11.5 percent of family income.3 Without 

help paying for child care, the cost can 

drive parents to exit the workforce or 

seek out less expensive care, which may 

be unlicensed or unregulated, have less 

rigorous quality or safety standards, and 

be less reliable.4 In fiscal year (FY) 

2021, the most current available data, 

CCDF helped nearly 800,000 families 

and more than 1.3 million children 

under age 13 with financial assistance 

for child care each month.5 CCDF also 

promotes the quality of child care for all 

children, requiring CCDF Lead Agencies 

to spend at least 12 percent of their 

CCDF funding each year on activities to 

improve child care quality for all 

children in care. 

Access to affordable high-quality 

child care has numerous short- and 

long-term benefits for children, families, 

and society, supporting child and family 

well-being in a manner that fuels 

prosperity and strengths communities 

and the economy. Child care is a 

necessity for most families with young 

children and reliable access leads to 

better parental earnings and 

employment and supports parents’ 

educational attainment.6 Specifically, 

maternal employment increases in 

response to more available and more 

affordable child care 7 and drops when 

child care becomes more expensive for 

families.8 Moreover, children with 

stably employed parents are far less 

likely to experience poverty than 


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9Thomson, D., Ryberg, R., Harper, K., Fuller, J., 

Paschall, K., Franklin, J., & Guzman, L. (2022). 

Lessons From a Historic Decline in Child Poverty. 

Bethesda, MD: Child Trends. https://www.child

trends.org/publications/lessons-from-a-historicdecline-in-child-poverty. 

10Bustamante et al. (2022). Adult outcomes of 

sustained high-quality early learning child care and 

education: Do they vary by family income? Child 

Development, 93(2), 502–523. https://srcd.online

library.wiley.com/doi/10.1111/cdev.13696.; Davis 

Schoch, A., Simons Gerson, C., Halle, T., & 

Bredeson, M. (2023). Children’s learning and 

development benefits from high-quality early care 

and education: A summary of the evidence. OPRE 

Report #2023–226. Office of Planning, Research, 

and Evaluation, Administration for Children and 

Families, U.S. Department of Health and Human 

Services. 

11Shonkoff, J.P., & Phillips, D.A. (Eds.). (2000). 

From neurons to neighborhoods: The science of 

early childhood development. National Academy 

Press. 

12U.S. Department of the Treasury (September 

2021). The Economics of Child Care Supply in the 

United States, https://home.treasury.gov/system/ 

files/136/The-Economics-of-Childcare-Supply-09- 

14-final.pdf. 

13Federal Reserve Bank of St. Louis. The 

Economic Impact of Child Care by State. https://

www.stlouisfed.org/community-development/childcare-economic-impact. 

14Malik, R. et al., (2018). America’s Child Care 

Deserts in 2018. Washington, DC: Center for 

American Progress. https://www.americanprogress.

org/article/americas-child-care-deserts-2018/. 

15Cui, J., and Natzke, L. (2021). Early Childhood 

Program Participation: 2019 (NCES 2020–075REV), 

National Center for Education Statistics, Institute of 

Education Sciences, U.S. Department of Education. 

Washington, DC. http://nces.ed.gov/pubsearch/ 

pubsinfo.asp?pubid=2020075REV. 

16Connecticut Association for Human Services. 

(July 2022). Child Care at a Breaking Point: The Cost 

for Parents to Work https://cahs.org/pdf/child-caresurvey-report7-15-22.pdf.; Powell, L. and Kravitz, D. 

(August 2022). ‘‘Michigan’s child care crisis is 

worse than policymakers have estimated,’’ 

Chalkbeat Detroit. https://detroit.chalkbeat.org/ 

2022/8/31/23329007/michigan-child-care-crisisdeserts-worse-policymakers-day-care. 

17https://www.whitehouse.gov/briefing-room/ 

statements-releases/2023/11/07/fact-sheet-historicbiden-harris-administration-investments-in-childcare-recovery-lowered-costs-for-millions-of-familieshelped-speed-the-return-to-work-of-hundreds-ofthousands-mothers-and-grew-t/. 

18ASPE unpublished analyses using U.S. Bureau 

of Labor Statistics, Current Employment Statistics— 

CES. 

19Landivar, L.C., Graf, N.L., & Rayo, G.A. (2023). 

Childcare Prices in Local Areas: Initial Findings 

from the National Database of Childcare Prices. U.S. 

Department of Labor.; 81 FR 67515 (https://

www.govinfo.gov/content/pkg/FR-2016-09-30/pdf/ 

2016-22986.pdf). 

children whose parents have less 

consistent employment.9 The positive 

effects of high-quality child care are 

especially pronounced for families with 

low incomes and families experiencing 

adversity.10 High-quality child care 

environments can also be important for 

children’s cognitive, behavioral, and 

socio-emotional development, helping 

chart a pathway to success in school 

and beyond.11

Despite the importance of access to 

high-quality child care to children, 

families, communities, and our 

country’s economic growth, child care 

remains a fundamentally broken system 

due to chronic underinvestment. As a 

result of this underinvestment, the child 

care system relies on a very poorly 

compensated workforce and 

unaffordable parent fees, causing most 

families to struggle to find or afford 

high-quality child care that meets their 

needs.12 There are not enough child care 

programs to serve families who need 

care and many programs do not offer 

care during the hours or days families 

require.13 More than half of families in 

the United States live in communities 

where potential demand for child care 

outstrips supply by at least three to 

one.14 In the 2019 National Household 

Education Survey on Early Childhood 

Program Participation, parents of 

children under the age of 6 reported the 

lack of available child care as the 

second biggest barrier to finding child 

care, with cost being the first.15

The COVID–19 public health 

emergency exacerbated these 

challenges, highlighting both the 

fragility of the child care sector and the 

central role child care plays in the 

broader economy.16 Numerous child 

care programs closed their doors 

permanently between the widespread 

onset of COVID–19 in March 2020 and 

the federal supports in the American 

Rescue Plan (ARP) in 2021. With ARP 

Child Care Stabilization funding, HHS 

invested $24 billion in the child care 

sector to help child care providers keep 

their doors open and to provide child 

care workers with higher pay, bonuses, 

and other benefits. These efforts helped 

over 225,000 child care programs 

serving as many as 10 million children 

across the country; saved families with 

young children who rely on paid child 

care approximately $1,250 per child per 

year; and helped hundreds of thousands 

of women with young children enter or 

re-enter the workforce more quickly, 

increasing the labor force participation 

and employment of mothers of young 

children by an additional 3 percentage 

points.17

Despite these investments, workforce 

shortages resulting in part from a tight 

labor market and a fundamentally 

broken child care market that forces low 

wages continue to put additional strains 

on child care supply across the 

country.18

In the years since the 2014 

reauthorization of the Act (P.L. 113– 

186) and the accompanying regulations

in 2016 (81 FR 67438, Sept. 30, 2016),

CCDF Lead Agencies have worked hard

to strengthen child care policies and

practices to make the child care subsidy

system more affordable and accessible

to families and to support the continuity

of care for children and working

families. However, regulatory changes to 

the CCDF program are needed to 

address some of the programmatic and 

systemic challenges described here and 

to ensure the program properly 

addresses the needs of children and 

families it serves. Though significant 

new investments and fundamental 

system reform are needed to fully 

realize affordable high-quality child care 

for all who need it, it is clear more must 

be done now within the federal child 

care program to help parents with low 

incomes that participate in the CCDF 

program access affordable high-quality 

child care that meets their families’ 

needs. 

III. Executive Summary

The final rule amends the CCDF

regulations to: (1) lower families’ costs 

for child care, to increase access to child 

care and improve family well-being; (2) 

strengthen CCDF payment practices to 

child care providers, to expand parents’ 

child care options and better support 

child care operations; and (3) reduce 

program bureaucracy for families, to 

make it easier for families to enroll in 

CCDF. The rule also makes some 

technical and other changes for 

improved clarity. 

Currently, some families participating 

in CCDF have co-payments that are a 

significant and destabilizing financial 

strain on family budgets and a barrier to 

participating in the CCDF program and 

maintaining employment.19 Many 

current CCDF provider payment rates 

and practices limit parent choice in 

child care arrangements, destabilize 

provider operations, contribute to 

supply issues, disincentivize provider 

participation in CCDF, and do not 

adequately cover the cost of care. This 

final rule includes important changes to 

the CCDF program to help participating 

families access the child care they need 

and better support child care providers 

in the essential work they do. 

Lowering Families’ Costs for Child Care 

Once implemented, HHS projects that 

the rule will lower the cost of child care 

for over 100,000 families participating 

in CCDF, improving family well-being 

and economic stability and better 

supporting parent employment. First, 

this final rule requires States and 

Territories to establish co-payment 

policies for families receiving CCDF 

assistance to be no more than 7 percent 

of family income to help ensure family 


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15368 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 

20 81 FR 67515. 

21Laughlin, Lynda. 2013. Who’s Minding the 

Kids? Child Care Arrangements: Spring 2011. 

Current Population Reports, P70–135. U.S. Census 

Bureau, Washington, DC. https://www2.census.gov/ 

library/publications/2013/demo/p70-135.pdf. 

22FFY 2021 ACF–801 data report. 

23FFY 2022–2024 CCDF State Plans. 

24 Ibid. 

25ASPE tabulations of the ACF–801 database. FY 

2005 to FY 2018 were tabulated using the publicuse files. FY 2019 to FY 2021 were tabulated using 

the restricted-use files. FY 2021 data were 

preliminary. 

26Landivar, L.C., Graf, N.L., & Rayo, G.A. (2023). 

Childcare Prices in Local Areas: Initial Findings 

from the National Database of Childcare Prices. U.S. 

Department of Labor. https://www.dol.gov/sites/ 

dolgov/files/WB/NDCP/508_WB_IssueBrief-NDCP20230213.pdf.; 81 FR 67515 (https://

www.govinfo.gov/content/pkg/FR-2016-09-30/pdf/ 

2016-22986.pdf).; National Survey of Early Care and 

Education Project Team (2022): Hardy, E. Park, J.E. 

2019 NSECE Snapshot: Child Care Cost Burden in 

U.S. Households with Children Under Age 5. OPRE 

Report No. 2022–05, Washington DC: Office of 

Planning, Research and Evaluation (OPRE), 

Administration for Children and Families (ACF), 

U.S. Department of Health and Human Services 

(HHS). https://www.acf.hhs.gov/opre/report/2019- 

nsece-snapshot-child-care-cost-burden-ushouseholds-children-under-age-5.; Scott, E.K., 

Leymon, A.S., & Abelson M. (2011). Assessing the 

Impact of Oregon’s 2007 Changes to Child-Care 

Subsidy Policy. Eugene, Oregon: University of 

Oregon. https://health.oregonstate.edu/earlylearners/research/assessing-impactsoregon%E2%80%99s-2007-changes-child-caresubsidy-policy.; Grobe, D., Weber, R., Davis, E. & 

Scott, E. (2012). Struggling to Pay the Bills: Using 

Mixed-Methods to Understand Families’ Financial 

Stress and Child Care Costs. Contemporary 

Perspectives in Family Research (6), 93–121. 

https://health.oregonstate.edu/sites/ 

health.oregonstate.edu/files/sbhs/pdf/struggling-topay-the-bills-using-mixed-methods-to-understandfamilies-financial-stress-and-child-care-costs.pdf.; 

Morrissey, T.W. (2017). ‘‘Child care and parent 

labor force participation: a review of the research 

literature.’’ Review of Economics of the Household 

15.1: 1–24. https://link.springer.com/content/pdf/ 

10.1007/s11150-016-9331-3.pdf. 

27Scott, E.K., Leymon, A.S., & Abelson M. (2011). 

Assessing the Impact of Oregon’s 2007 Changes to 

Child-Care Subsidy Policy. Eugene, Oregon: 

University of Oregon. https://health.oregonstate.

edu/early-learners/research/assessing-impactsoregon%E2%80%99s-2007-changes-child-caresubsidy-policy.; Grobe, D.,Weber, R., & Davis, E. & 

Scott, E. (2012). Struggling to Pay the Bills: Using 

Mixed-Methods to Understand Families’ Financial 

Stress and Child Care Costs. Contemporary 

Perspectives in Family Research (6), 93–121. 

https://health.oregonstate.edu/sites/ 

health.oregonstate.edu/files/sbhs/pdf/struggling-topay-the-bills-using-mixed-methods-to-understandfamilies-financial-stress-and-child-care-costs.pdf. 

28EveryChild California. (April 2, 2023). 

EveryChild CA Family Fee Survey Results. 

29 Ibid. 

30Rohacek, M., & Adams, G. (2017). Providers in 

the child care subsidy system. Washington, DC: 

Urban Institute. https://www.urban.org/sites/ 

default/files/publication/95221/providers-andsubsidies.pdf. 

31Scott, E.K., Leymon, A.S., & Abelson M. (2011). 

Assessing the Impact of Oregon’s 2007 Changes to 

Child-Care Subsidy Policy. Eugene, Oregon: 

University of Oregon. https://health.oregonstate.

edu/early-learners/research/assessing-impactsoregon%E2%80%99s-2007-changes-child-caresubsidy-policy.; Grobe, D.,Weber, R., & Davis, E. & 

Scott, E.. (2012). Struggling to Pay the Bills: Using 

Mixed-Methods to Understand Families’ Financial 

Stress and Child Care Costs. Contemporary 

Perspectives in Family Research (6), 93–121. 

https://health.oregonstate.edu/sites/ 

health.oregonstate.edu/files/sbhs/pdf/struggling-topay-the-bills-using-mixed-methods-to-understandfamilies-financial-stress-and-child-care-costs.pdf.; 

Anderson, T. et al. (January 2022). Balancing at the 

Edge of the Cliff: Experiences and Calculations of 

Benefit Cliffs, Plateaus, and Trade-Offs. 

Washington, DC: Urban Institute. https://www.

urban.org/research/publication/balancing-edgecliff. 

co-payments are not a barrier to 

accessing child care. HHS established 7 

percent of a family’s income as the 

benchmark for an affordable copayments in 2016 20 based on data from 

the U.S. Census Bureau that showed on 

average families spent 7 percent of 

income on child care, but that poor 

families on average spent approximately 

four times the share of their income on 

child care compared to higher income 

families.21 According to ACF data, 

average CCDF co-payments in 11 States 

exceed 7 percent of family income,22 20 

States have policies that allow some 

family co-payments above 7 percent 

(which can even rise as high as 27 

percent of family income),23 and 16 

States do not have clear policies in 

place to restrict co-payments to any 

percentage of family income.24 CCDF 

family co-payments increased at a rate 

higher than inflation between 2005– 

2021, with an average 18 percent 

increase (after adjusting for inflation) for 

families during this period.25

The Act requires States and 

Territories to establish and periodically 

revise co-payment policies that are ‘‘not 

a barrier to families receiving’’ CCDF 

assistance. (42 U.S.C. 9858c(5)). High 

co-payments can be a significant and 

destabilizing financial strain on family 

budgets, a barrier to families 

participating in the CCDF program, and 

a barrier to parent employment.26

Unaffordable co-payments can limit 

family participation in the CCDF 

program, cause parents to cut work 

hours or exit the workforce entirely, and 

may lead families to patch together 

informal, unregulated care that is less 

expensive, less reliable, and less likely 

to meet children’s developmental needs. 

Even families receiving child care 

subsidies continue to experience 

substantial financial burden in meeting 

their portion of child care costs.27

According to a 2023 survey of families 

that participated in CCDF without a copay, 56 percent of parents reported that 

they would disenroll their children from 

the subsidized child care program if copayments were required.28 Surveyed 

parents explained that needing to pay a 

co-payment would cause strain on their 

family budget, with one parent 

explaining, ‘‘I would have to choose 

which minimum necessities to afford 

that month—rent, utilities, or food . . . 

the choice is impossible,’’ and another 

sharing, ‘‘I would not be able to 

work.’’ 29 We retain the 7 percent cap in 

this final rule because we believe 

amounts in excess of this threshold pose 

a barrier to child care access in the 

CCDF program. ACF notes that 7 

percent of family income is not 

affordable for many families 

participating in CCDF. ACF encourages 

Lead Agencies to adopt lower copayment caps and minimize or waive 

co-payments when possible and this 

rule makes it easier to do so. 

The rule makes it easier for Lead 

Agencies to waive co-payments for 

additional families, specifically for 

families living at or below 150 percent 

of the federal poverty level, families 

with children in foster and kinship care, 

families with children with disabilities, 

families experiencing homelessness, 

and children enrolled in Head Start or 

Early Head Start. ACF believes making 

it easier for Lead Agencies to waive 

parent co-payments for these 

populations will increase uptake of an 

existing program flexibility and lower 

child care costs for more families 

participating in CCDF, especially those 

with lower incomes and vulnerable 

children, as well as making it easier to 

coordinate with Head Start and Early 

Head Start. Lead Agencies report that 

families with low incomes in their 

jurisdictions are still struggling to afford 

child care, even when they receive child 

care subsidies.30 Eliminating child care 

costs for additional families will better 

support parents’ education, training, 

and work opportunities and families’ 

financial stability and well-being. As 

just noted, co-payments, even very low 

co-payments, remain a barrier for some 

families to make ends meet, especially 

families struggling to afford housing 

costs.31 This policy will shift costs that 

currently burden participating families 

to Lead Agencies and does not impact 

the total payment made to the child care 

provider. 

These new flexibilities should not 

discourage States and Territories from 

taking steps to eliminate or significantly 

reduce co-payments for additional 

families who do not fall within one of 

the categories listed in this rule for preapproved waiving of co-payments. Lead 

Agencies may still propose a higher 

income threshold for waiving copayments, at their discretion, utilizing 

existing authority in the statute. 


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32Federal Reserve Bank of St. Louis. The 

Economic Impact of Child Care by State. https://

www.stlouisfed.org/community-development/childcare-economic-impact. 

33Malik, R. et al., (2018). America’s Child Care 

Deserts in 2018. Washington, DC: Center for 

American Progress. https://www.americanprogress.

org/article/americas-child-care-deserts-2018/. 

34Smith, L., Bagley, A., and Wolters, B. 

(November 2021). Child Care in 35 States: What we 

know and don’t know. Washington, DC: Bipartisan 

Policy Center. 

35 Datta, A.R., Milesi, C., Srivastava, S., ZapataGietl, C. (2021). NSECE Chartbook—Home-based 

Early Care and Education Providers in 2012 and 

2019: Counts and Characteristics. OPRE Report No. 

2021–85, Washington DC: Office of Planning, 

Research and Evaluation, Administration for 

Children and Families, U.S. Department of Health 

and Human Services. https://www.acf.hhs.gov/ 

opre/report/nsece-hb-chartbook-counts-andcharacteristics. 

36 Datta, A.R., Gebhardt, Z., Zapata-Gietl, C. 

(2021). Center-based Early Care and Education 

Providers in 2012 and 2019: Counts and 

Characteristics. OPRE Report No. 2021–222, 

Washington DC: Office of Planning, Research and 

Evaluation, Administration for Children and 

Families, U.S. Department of Health and Human 

Services. https://www.acf.hhs.gov/sites/default/ 

files/documents/opre/cb-counts-andcharacteristics-chartbook_508_2.pdf. 

37U.S. Department of the Treasury. (2021). The 

Economics of Child Care Supply in the United 

States. https://home.treasury.gov/system/files/136/ 

The-Economics-of-Childcare-Supply-09-14- 

final.pdf. 

38 Ibid. 

39 Ibid. 

40 Ibid. 

41U.S. Department of Health and Human 

Services. Office of the Inspector General. (August 

2019). States’ Payment Rates Under the Child Care 

and Development Fund Program Could Limit 

Access to Child Care Providers (Report in Brief 

OEI–03–15–00170). https://oig.hhs.gov/oei/reports/ 

oei-03-15-00170.pdf. 

42https://www.naeyc.org/sites/default/files/ 

wysiwyg/user-73607/naeyc_nprm_

comments.final.pdf. 

Strengthening CCDF Payment Practices 

to Child Care Providers and Increasing 

Families’ Options 

This final rule will strengthen Lead 

Agency payment rates and practices to 

more than 150,000 child care providers 

to better cover the cost of care, increase 

the financial stability of child care 

providers that accept CCDF subsidies, 

and encourage more providers to accept 

subsidies. These policies will expand 

available child care options to parents 

participating in CCDF so they can find 

child care that meets their families’ 

needs. Despite the importance of access 

to high-quality child care to children, 

families, and communities, there is not 

enough child care to serve families who 

need it.32 A 2018 analysis found that 51 

percent of families with children under 

age 5 lived in a ‘‘child care desert’’—an 

area where there are three times as 

many children under age 5 than there 

are spaces in licensed settings.33 A 2019 

analysis of 35 States found only 7.8 

million child care slots for the 11.1 

million children under the age of 5 with 

the potential need for child care.34

Parents have long struggled to find child 

care that meets their needs, and the 

decline in child care options, especially 

family child care homes, has 

perpetuated the problem. Between 2012 

and 2019, the number of family child 

care providers decreased by 25 

percent 35 without a complementary 

increase in center-based programs.36

A key contributor to this lack of 

supply is that child care providers 

usually operate with profit margins of 

less than 1 percent.37 To remain open, 

child care providers must keep costs 

low enough so families are not priced 

out of care, but because labor is the 

main business expense, most providers 

can only remain operational if they pay 

low wages and offer minimal benefits 

for this essential and skilled work 

overwhelmingly done by women and 

disproportionately by women of color.38

These working conditions lead to high 

turnover, with an estimated 26 to 40 

percent of the child care workforce 

leaving their job each year.39 Children 

in underserved geographic areas 

especially have less access to highquality child care options and parents 

struggle to find high-quality child care 

that is reliably available and 

affordable.40

CCDF must do more to help address 

supply challenges and ensure parents 

have a wide range of child care choices 

that meet their needs, a core purpose of 

the program. The final rule includes key 

changes to address some of the 

challenges experienced by families and 

providers participating in CCDF. The 

rule: (1) requires Lead Agencies to pay 

providers prospectively and based on 

child enrollment to align with generally 

accepted payment practices in the 

private market and better reflect the 

fixed costs of child care; (2) requires 

Lead Agencies to use some grants and 

contracts for direct services, at a 

minimum for children in underserved 

geographic areas, infants and toddlers, 

and children with disabilities; and (3) 

clarifies that Lead Agencies are allowed 

and encouraged to pay child care 

providers the full established payment 

rate, even if it is higher than the price 

the provider charges privately paying 

families. 

First, the rule requires Lead Agencies 

use timely and enrollment-based 

payment practices for child care 

providers to align with generally 

accepted payment practices in the 

private sector. The Act requires States 

and Territories to certify that ‘‘the 

payment practices of child care 

providers in the State that serve 

children who receive [CCDF] assistance 

. . . reflect generally accepted payment 

practices of child care providers in the 

State that serve children who do not 

receive [CCDF] assistance . . ., so as to 

provide stability of funding and 

encourage more child care providers to 

serve children who receive [CCDF] 

assistance . . .’’ (42 U.S.C. 

9858c(c)(2)(S)). The Act also requires 

States and Territories to show how they 

‘‘provide for timely payment for child 

care services provided under [CCDF]’’ 

(42 U.S.C. 9858c(c)(4)(B)(iv)). The 

revisions promulgated by this rule will 

help account for some of the fixed costs 

of providing child care, support better 

provider stability, and increase child 

care options for families participating in 

CCDF. Generally accepted payment 

practices for parents who do not receive 

subsidies (which are most parents) 

require a set fee, are based on a child’s 

enrollment, and are paid in advance of 

when services are provided. This is 

necessary because the fixed costs of 

providing child care, including staff 

wages, rent, and utilities do not 

decrease when a child is absent and 

must be budgeted prior to service 

delivery. The Act requires Lead 

Agencies to use generally accepted 

payment practices, because it makes it 

easier for child care providers to serve 

children receiving assistance from CCDF 

and fosters equal access to child care for 

participating parents, which is a central 

purpose of the CCDF program. Providers 

often mention delayed payments and 

their destabilizing effect on child care 

operations as a key reason why they do 

not participate in the CCDF program.41

But according to FY 2022–2024 CCDF 

State and Territory Plans, only eight 

States and Territories pay prospectively 

and only 36 pay providers based on 

enrollment. Providers in States that pay 

based on attendance either absorb the 

lost revenue associated with a child’s 

occasional absences or choose not to 

participate in the subsidy system, which 

limits parent choices. An August 2023 

survey of child care providers found 80 

percent of child care center directors/ 

administrators and family child care 

owners/operators who responded to the 

survey would be more likely to serve 

families using subsidies if the State paid 

based on enrollment rather than 

attendance, and 73 percent said they 

would be more likely if the State paid 

prospectively.42

Second, the rule requires Lead 

Agencies to use some grants and 

contracts for direct child care services to 

enable CCDF to better address child care 


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15370 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 

43Child Care Technical Assistance Network. 

(October 2021). Implementation Guide: Strategies to 

Support Use of Contracts and Grants for Child Care 

Slots. U.S. Department of Health and Human 

Services, Administration for Children and Families, 

Office of Child Care. https://childcareta.acf.hhs.

gov/sites/default/files/new-occ/resource/files/ 

implementation_guide_use_of_contracts_508.pdf; 

Morrissey, T. and Workman, S. (August 4, 2020). 

Grants and Contracts: A Strategy for Building the 

Supply of Subsidized Infant and Toddler Child 

Care. Washington, DC: Center for American 

Progress. https://cdn.americanprogress.org/content/ 

uploads/2020/08/03112628/Grants-andContracts.pdf. 

44https://www.acf.hhs.gov/occ/data/fy-2020- 

preliminary-data-table-2. 

45Slicker, G., Barbieri, C.A., and Hustedt, J.T. 

(2023) The role of state subsidy policies in early 

education programs’ decisions to accept subsidies: 

evidence from nationally representative data. Early 

Education and Development, DOI: 10.1080/ 

10409289.2023.2244859. https://

www.tandfonline.com/doi/full/10.1080/ 

10409289.2023.2244859.; Weber, R.B. and Grobe, D. 

(2015), Contracted slots pilot program evaluation. 

https://health.oregonstate.edu/sites/ 

health.oregonstate.edu/files/early-learners/pdf/ 

research/contracted_slots_pilot_evaluation_-_

executive_summary.pdf; Giapponi Schneider, K., 

Erickson Warfield, M., Joshi, P., Ha, Y., & Hodgkin, 

D. (2017). Insights into the black box of child care 

supply: Predictors of provider participation in the 

Massachusetts child care subsidy system. https://

www.sciencedirect.com/science/article/abs/pii/ 

S0190740917300750. 

46https://www.naeyc.org/sites/default/files/ 

wysiwyg/user-73607/naeyc_nprm_

comments.final.pdf. 

47 Dorn, C. (August 2020). Infant and Toddler 

Contracted Slots Pilot Program: Evaluation Report. 

Pennsylvania Office of Childhood Development and 

Early Learning. https://s35729.pcdn.co/wp-content/ 

uploads/2020/11/IT-Pilot-Evaluation-Report_PA_

Final.V2.pdf. 

48Sotolongo, J., et al. (May 2017). Voices from the 

Field: Providers’ Experiences with Implementing 

DECAL’s Quality Rated Subsidy Grant Pilot 

Program. Chapel Hill, NC: Child Trends. https://

www.decal.ga.gov/documents/attachments/Voices

FromtheField.pdf. 

49Unpublished FY 2021 ACF Administrative 

Data. 

50Cogswell, M.E., Coil, E., Tian, L.H., Tinker, 

S.C., Ryerson, A.B., Maenner, M.J, Rice, C.E., 

Peacock, G. (2022). Health Needs and Use of 

Services Among Children with Developmental 

Disabilities—United States, 2014–2018. Morbidity 

and Mortality Weekly Report. 71(12):453–458. 

51The White House (March 2023). Economic 

Report of the President. https://

www.whitehouse.gov/wp-content/uploads/2023/03/ 

ERP-2023.pdf. 

52Novoa, C. (2020). The child care crisis 

disproportionately affects children with disabilities. 

Washington, DC: Center for American Progress. 

https://www.americanprogress.org/article/childcare-crisis-disproportionately-affects-childrendisabilities. 

53https://www.acf.hhs.gov/occ/data/fy-2020- 

preliminary-data-table-21. 

supply issues for participating families. 

The Act requires States and Territories 

to offer parents of eligible children the 

option to either ‘‘enroll such child with 

a child care provider that has a grant or 

contract for the provision of such 

services; or to receive a child care 

certificate’’ (42 U.S.C. 9858c(c)(2)(A)). 

Grants and contracts represent 

agreements between the subsidy 

program and child care providers to 

designate slots for subsidy-eligible 

children and are an important tool for 

building child care supply.43 However, 

only 10 States and Territories report 

using any grants and contracts for direct 

services, and only 6 States and 

Territories report supporting more than 

5 percent of children receiving subsidy 

via a grant or contract.44 Sufficiently 

funded grants and contracts for direct 

services are more likely to increase 

stability for child care providers than 

certificates, helping them remain in 

business, and thereby maintaining or 

increasing the supply of child care.45

One survey of providers found 80 

percent of center-based directors and 

administrators and family child care 

owner/operators would be interested in 

applying for grants or contracts to serve 

populations identified in the final 

rule.46 An evaluation of an infant and 

toddler contracted slot pilot in 

Pennsylvania found that participating 

programs experienced increased 

classroom quality and had greater 

financial stability than providers solely 

paid through certificates. Contracts led 

to more stable enrollment for infants 

and toddlers receiving child care 

subsidies.47 They also found evidence 

that providers were better able to hire 

and retain qualified staff and establish 

better coordination between local and 

State systems. Georgia also used grants 

and contracts to build the supply of care 

for infants and toddlers. Providers 

reported an increase in enrollment of 

children from families who would have 

normally struggled to pay for care 

because the program was better able to 

connect the families with a contractfunded subsidy.48 They also reported 

that the higher reimbursement rate paid 

with the contracts was closer to the true 

cost of providing care and allowed 

providers to invest in quality 

improvements. 

The rule specifically requires Lead 

Agencies to use some grants and 

contracts for children in underserved 

geographic areas, infants and toddlers, 

and children with disabilities— 

populations that the statute identifies 

Lead Agencies must develop and 

implement strategies to increase the 

supply and quality of care. 42 U.S.C. 

9858c(c)(2)(M). Finding care for infants 

and toddlers and children with 

disabilities is particularly difficult for 

parents. Higher operational costs per 

child, the need for specialized training, 

and physical space needs generally 

require additional funding and planning 

and make supply issues particularly 

acute. At the same time, these 

populations constitute a sizable portion 

of the population of children potentially 

eligible for CCDF: infants and toddlers 

constitute about one-third of children 

receiving CCDF,49 and 17 percent of 

children have a developmental 

disability.50 For infants and toddlers, 

the potential demand far exceeds the 

available supply. A 2020 analysis of 19 

States and the District of Columbia, 

representing close to 40 percent of the 

U.S. population, found there were at 

least three infants or toddlers for every 

child care slot for children under three 

in 80 percent of the counties analyzed.51

For children with disabilities, data from 

the 2016 Early Childhood Program 

Participation Survey showed that 34 

percent of parents of children with 

disabilities had at least some difficulty 

finding child care compared to 25 

percent of parents of children without 

disabilities.52 Despite Lead Agencies’ 

obligation to develop strategies to serve 

this population, approximately twenty 

states report serving no children with 

disabilities.53

Third, the rule clarifies that Lead 

Agencies are allowed and encouraged to 

pay child care providers the full agencyestablished payment rate to account for 

the actual cost of care, even if it is 

higher than the price the provider 

charges private pay families. The Act 

requires States and Territories to 

‘‘certify that payment rates for the 

provision of child care services for 

which [CCDF] assistance is provided 

. . . are sufficient to ensure equal access 

for eligible children to child care 

services that are comparable to child 

care services in the State or substate 

area involved that are provided to 

children whose parents are not eligible 

to receive [CCDF] assistance.’’ (42 U.S.C. 

9858c(c)(4)). States and Territories must 

also set rates in accordance with market 

rate surveys that reflect ‘‘variations in 

the cost of child care services by 

geographic area, type of provider and 

age of child,’’ and take into 

consideration ‘‘the cost of providing 

higher quality child care services that 

were provided . . . before November 19, 

2014.’’ (42 U.S.C. 9858c(c)(4)(B)). 

Because child care providers’ price for 

services reflects what private-pay 

families enrolling in their programs can 

afford and not necessarily the (higher) 

cost of providing services, payment 

rates are artificially constrained by 

affordability, particularly in low-income 

neighborhoods. Under CCDF, Lead 

Agencies set payment rates using a 

market rates survey or a cost-based 

alternative methodology, but some Lead 

Agencies pay below their established 

rate to match the constrained price a 


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54Lee, R., Gallo, K., Delaney, S., Hoffman, A., 

Panagari, Y., et al. (2022). Applying for child care 

benefits in the United States: 27 families’ 

experiences. US Digital Response. https://www.

usdigitalresponse.org/projects/applying-for-childcare-benefits-in-the-united-states-27-familiesexperiences. 

55Adams, G., Snyder, K., & Banghart, P. (2008). 

Designing subsidy systems to meet the needs of 

families: An overview of policy research findings. 

Washington, DC: Urban Institute. https://www.

urban.org/research/publication/designing-subsidysystems-meet-needs-families. 

56 Ibid. 

57 Ibid. 

58Morrissey, T.W. (2017). ‘‘Child care and parent 

labor force participation: a review of the research 

literature.’’ Review of Economics of the Household 

15.1: 1–24. https://link.springer.com/content/pdf/ 

10.1007/s11150-016-9331-3.pdf. 

59Blau, D., Tekin, E. (2007). The determinants 

and consequences of child care subsidies for single 

mothers in the USA. Journal of Population 

Economics 20, 719–741. https://doi.org/10.1007/ 

s00148-005-0022-2.; Morrissey, T.W. 2017. Child 

care and parent labor force participation: a review 

of the research literature. Review of Economics of 

the Household 15, 1–24. https://doi.org/10.1007/ 

s11150-016-9331-3.; Shonkoff, J. P., & Phillips, D. A. 

(Eds.). (2000). From neurons to neighborhoods: The 

science of early childhood development. National 

Continued 

provider charges parents paying 

privately. Not only does this practice 

contribute to instability in the child care 

sector, it also creates pressure on 

providers to raise rates on private pay 

families. The rule codifies this existing 

flexibility to pay above the private rate 

to encourage more Lead Agencies to 

adopt this practice, which will promote 

equal access for participating families, 

increase parent options in care 

arrangements, and help increase the 

number and percentage of children from 

families with low incomes in highquality child care settings, all central 

purposes of the Act. 

Easier Enrollment for Families Through 

Reduced Bureaucracy 

Finally, this rule includes changes to 

encourage easier enrollment and reenrollment processes for families 

applying for child care subsidies. First, 

this rule establishes parameters for Lead 

Agencies that choose to implement 

presumptive eligibility with the goal of 

reducing barriers for Lead Agency 

uptake for this existing program 

flexibility and helping more families 

receive child care assistance faster. The 

rule also requires Lead Agencies to 

implement eligibility policies and 

procedures that minimize disruptions to 

parent employment, education, or 

training opportunities. These rules align 

with section 658E(c)(2)(N) the Act, 

requiring States and Territories to 

develop procedures and policies that 

‘‘ensure that working parents. . .are not 

required to unduly disrupt their 

employment in order to comply with 

the State’s or designated local entity’s 

requirements for redetermination of 

eligibility for [CCDF] assistance.’’ (42 

U.S.C. 9858c(c)(2)(N)). 

These changes will help address what 

can be a slow and difficult process for 

initial CCDF eligibility determination.54

Burdensome application processes 

discourage families from applying for 

child care assistance, delay access to 

child care, and cause substantial stress 

to parents.55 They can also derail or 

delay employment, education, or 

training, harm family economic wellbeing, and lead parents to pay for care 

that is either unaffordable, unregulated, 

or lower quality.56 Evidence suggests 

presumptive eligibility can be 

implemented with relatively low levels 

of financial risk for Lead Agencies, and 

the potential benefits for families are 

substantial.57 Families reported it 

helped them obtain full verification 

documents more easily and that 

providers were more willing to enroll 

children because payments were already 

guaranteed. 

Flexibility for Tribal Lead Agencies 

For the most part, Tribal Lead 

Agencies are exempt from the new 

requirements included in this final rule, 

but the rule includes two important new 

flexibilities for Tribes. First, it updates 

the definition for major renovation in a 

manner that will reduce the types of 

projects for which Tribal Lead Agencies 

must submit applications. Second, it 

provides all CCDF Tribal Lead Agencies 

the flexibility to waive parent copayments for all parents receiving CCDF 

assistance. These exemptions and 

flexibilities are discussed in Subpart I. 

On July 27, 2023, ACF released a 

Request for Information (RFI) to seek 

extensive input on whether existing 

CCDF requirements, regulations, and 

processes are appropriate for Tribal 

Nations to implement CCDF in a 

manner that best meets the needs of the 

children, families, and child care 

providers in their Nations and 

communities and that properly 

recognizes the principals of strong 

government-to-government 

relationships and Tribal sovereignty. 

The public comment period ended 

January 2, 2024, and ACF hosted 

multiple listening sessions and two 

Tribal consultations to solicit 

comments. ACF will consider the need 

for potential further regulatory changes 

as part of this broader RFI effort. 

Effective Dates 

This final rule will become effective 

60 days from the date of its publication. 

Compliance with provisions in the rule 

will be determined through ACF review 

and approval of CCDF Plans, including 

CCDF Plan amendments, as well as 

through federal monitoring, including 

on-site monitoring visits as necessary. 

We recognize that at the time of 

publication of this final rule, States and 

Territories are in the process of 

completing their FFY 2025–2027 CCDF 

Plans, which are due July 1, 2024. With 

the issuance of this final rule, any State 

or Territory that does not fully meet the 

requirements of these regulations, will 

need to revise its policies and 

procedures to come into compliance. 

We are allowing Lead Agencies to 

request temporary transitional waivers 

for up to two years to ensure there is 

enough time to execute the steps 

necessary to be in compliance with this 

final rule. This final rule revises the 

process to request temporary 

transitional waivers on the updated 

provisions in this final rule as described 

at § 98.19. This waiver authority does 

not extend past two years. We also note 

that requests for extensions through 

legislative or transitional waivers will 

only be considered for provisions 

substantively updated in this final rule. 

ACF will use federal monitoring in 

accordance with § 98.90. 

Tribal Lead Agencies will describe 

any changes made in response to this 

final rule in new triennial Plans for FFY 

2026–2028, with an effective date of 

October 1, 2025. Tribes that have 

consolidated CCDF with other 

employment, training, and related 

programs under Public Law 102–477, 

are not required to submit separate 

CCDF Plans, but will be required to 

demonstrate compliance with this final 

rule in their next Public Law 102–477 

Plan submission, along with associated 

documentation. 

Costs, Benefits, and Transfer Impacts 

Changes made by this final rule will 

have the most direct benefit for the 

nearly 800,000 families and 1.3 million 

children who use CCDF assistance to 

pay for child care. Families who receive 

CCDF assistance will benefit from lower 

parent co-payments, more parent choice 

in care arrangements, and simplified 

eligibility determination processes, 

which will increase child care access 

and affordability. Greater access and 

affordability will improve the ability of 

families to participate in the labor 

market and benefit the overall economy. 

Research has demonstrated that 

increased access to child care increases 

maternal labor force participation.58 In 

particular, child care subsidies have 

been found to increase employment 

among single mothers.59


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15372 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 

Academy Press.; Herbst, C. (2017). Universal Child 

Care, Maternal Employment, and Children’s LongRun Outcomes: Evidence from the US Lanham Act 

of 1940. Journal of Labor Economics, 35 (2). https:// 

doi.org/10.1086/689478. 

60Borowsky, J., et al (2022). An equilibrium 

model of the impact of increased public investment 

in early childhood education. Working Paper 

30140. http://www.nber.org/papers/w30140. 

61 Deming, D. 2009. ‘‘Early Childhood 

Intervention and Life-Cycle Skill Development: 

Evidence from Head Start.’’ American Economic 

Journal: Applied Economics, 1 (3): 111–34.; 

Duncan, G.J., and Magnuson, K. 2013. ‘‘Investing in 

Preschool Programs.’’ Journal of Economic 

Perspectives, 27 (2): 109–132; Heckman, J., and 

Kautz, T. ‘‘Fostering and Measuring Skills 

Interventions That Improve Character and 

Cognition.’’ In The Myth of Achievement Tests: The 

GED and the Role of Character in American Life. 

Edited by James J. Heckman, John Eric Humphries, 

and Tim Kautz (eds). University of Chicago Press, 

2014. Chicago Scholarship Online, 2014. https://

doi.org/10.7208/chicago/9780226100128.003.0009.; 

Weiland, C., Yoshikawa, H. 2013. ‘‘Impacts of a 

Prekindergarten Program on Children’s 

Mathematics, Language, Literacy, Executive 

Function, and Emotional Skills.’’ Child 

Development, 86(6), 2112–2130. 

Providers will benefit from this rule’s 

payment practice requirements that 

support providers’ financial stability, 

including prospective payments based 

on enrollment and payments that more 

closely reflect the cost of providing 

high-quality care, which could lead to 

higher wages for providers and their 

staff.60 This rule will also yield benefits 

in terms of child development 

outcomes. The provisions in this rule 

expand child care access and some 

children who might have not received 

subsidized care under the current rule 

(e.g., those whose parents could not pay 

the co-pay) would receive subsidized 

care under this new final rule. For these 

children, they are likely to receive 

higher quality care than they otherwise 

would have. Research demonstrates 

clear linkages between high quality 

child care and positive child outcomes, 

including school readiness, socialemotional outcomes, educational 

attainment, employment, and 

earnings.61

The cost of implementing changes 

made by this rule would vary depending 

on a Lead Agency’s specific situation 

and implementation choices. ACF 

conducted a regulatory impact analysis 

(RIA) to estimate costs, transfers, and 

benefits of provisions in this final rule, 

considering current State and Territory 

practices. Due to limitations in data, we 

did not include Tribal Lead Agency 

practices in the RIA. We evaluated 

major areas of policy change, including 

reduced parent co-payments, paying 

providers based on enrollment, paying 

providers prospectively, paying 

providers the full subsidy rate, 

presumptive eligibility for families, and 

streamlined family eligibility processes. 

In response to feedback received during 

the public comment period, we have 

further refined these estimates for the 

final rule, making key changes 

including adding a systems’ cost to 

account for necessary information 

technology changes and updating 

calculations to use the most recent 

CCDF administrative data. Due to 

limited data related to children with 

disabilities in the relevant policy areas, 

for the purposes of this RIA, we did not 

conduct separate cost estimates specific 

to children with disabilities. 

Based on the calculations in the RIA, 

we estimate the quantified annualized 

impact of the rule to be about $206.6 

million in transfers, $13.1 million in 

costs, and $15.3 million in benefits. 

Further detail and explanation can be 

found in the RIA. 

Severability 

The provisions of this final rule are 

intended to be severable, such that, in 

the event a court were to invalidate any 

particular provision or deem it to be 

unenforceable, the remaining provisions 

would continue to be valid. The changes 

address a variety of issues relevant to 

child care. None of the provisions in the 

final rule contained herein are central to 

an overall intent of the final rule, nor 

are any provisions dependent on the 

validity of other, separate provisions. 

IV. Development of Regulation 

Throughout the period since 2016 

when the last CCDF Rule was 

published, HHS has learned from Lead 

Agencies, families, and child care 

providers; assessed the evolving child 

care landscape; examined the successes 

and challenges in the reauthorized Act’s 

implementation; and tracked the impact 

and implications of the COVID–19 

public health emergency on the child 

care sector. The policies in this final 

rule are informed by these lessons and 

are designed to improve on the work of 

the past and build a stronger CCDF 

program that more effectively supports 

the development of children, the 

economic well-being of families, and the 

stability of child care providers. 

ACF published a notice of proposed 

rulemaking (NPRM) in the Federal 

Register on July 13, 2023, (88 FR 45022) 

proposing revisions to CCDF 

regulations. We provided a 45-day 

comment period during which 

interested parties could submit 

comments in writing electronically. 

ACF received 1,796 comments, of 

which 1,639 were unique comments, on 

the proposed rule (public comments on 

the proposed rule are available for 

review on www.regulations.gov), 

including comments from state human 

services and educational agencies, 

Tribal Nations and Tribal organizations, 

national, state, and local early 

childhood and family-focused 

organizations, including, child care 

resource and referral agencies, faithbased organizations, provider 

organizations, as well as labor unions, 

child care providers, parents, individual 

members of the public, and members of 

the U.S. Congress. We were pleased to 

receive comments from 29 State and 

local governments and 13 Tribes and 

Tribal organizations. Some commenters 

coordinated comments and policy 

recommendations so that their 

comments were signed by multiple 

entities, and there were some member 

organizations that each submitted the 

same comments separately. We also 

processed form comments from 

hundreds of individuals, including 

parents and child care staff. Public 

comments informed the development of 

content for this final rule. 

Changes in this final rule affect the 

State, Territory, and Tribal agencies that 

administer the CCDF. ACF has and will 

continue to consult with State, 

Territory, and Tribal agencies and 

provide technical assistance throughout 

implementation. 

This final rule maintains the structure 

and organization of the current CCDF 

regulations. The preamble in this final 

rule discusses the changes to current 

regulations and contains certain 

clarifications based on ACF’s experience 

in implementing the prior final rules. 

Where language of previous regulations 

remains unchanged, the preamble 

explanation and interpretation of that 

language published with all prior final 

rules also is retained, unless specifically 

modified in the preamble to this rule. 

(See 57 FR 34352, Aug. 4, 1992; 63 FR 

39936, Jul. 24, 1998; 72 FR 27972, May 

18, 2007; 72 FR 50889, Sep. 5, 2007; 81 

FR 67438, Sept. 30, 2016). 

V. General Comments and CrossCutting Issues 

This final rule includes substantive 

changes in several key policy areas in 

the CCDF regulations. We received 

comments on all the significant 

proposed changes and made some 

revisions in this final rule in response 

to these comments. We discuss specific 

comments in the section-by-section 

analysis later in this final rule. 

The vast majority of the 1,639 unique 

public comments were supportive of the 

proposals and validated their future 

benefits to children, families, and child 

care providers. Each major proposal 

received much more support than 

opposition. Commenters strongly 

supported the need to lower child care 


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Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 15373 

62 63 FR 39980 (https://www.govinfo.gov/content/ 

pkg/FR-1998-07-24/pdf/98-19418.pdf). 

costs for families, noting the importance 

of ensuring co-payments are not a 

barrier to child care access. Commenters 

also strongly supported the need for 

CCDF payment practices to providers 

that would better cover the cost of care, 

help stabilize operations, and 

incentivize child care providers to 

accept families with child care 

subsidies. 

Some supporters also expressed 

concerns about potential unintended 

consequences of the rule without 

additional resources, called for 

additional guidance and technical 

assistance on the proposed changes, 

recommended consideration of the 

implementation timeline, and stressed 

the need for major long-term funding 

increases for child care beyond 

regulatory changes. Some supporters 

expressed concerns that without 

additional investments to accompany a 

final rule, the costs of the proposal 

inadvertently could be passed on to 

child care providers or result in fewer 

families receiving subsidies, particularly 

in the context of supplemental COVID– 

19 funding coming to a close. 

We seriously considered concerns 

about cost and recognize that the final 

rule contains provisions that will 

require some States and Territories to 

direct CCDF funds to implement 

specific provisions. Many Lead 

Agencies have already implemented 

some of the provisions in this final rule. 

In addition, each year, approximately 

$11.6 billion in federal funding is 

allocated for CCDF. The activities to 

implement requirements in this final 

rule are all allowable costs in the CCDF 

program. Changes made by this final 

rule represent a commitment to 

ensuring the goals of the 2014 

reauthorization of the Act are realized, 

including making child care more 

affordable and accessible to families and 

improving stability for child care 

providers. ACF will continue our 

regular work of supporting CCDF Lead 

Agencies through guidance and 

technical assistance in partnership with 

the CCDF-funded Child Care Technical 

Assistance Network. 

Several commenters noted that Lead 

Agencies will need time to implement 

the requirements included in this final 

rule, including time to take 

administrative or legislative actions, and 

some commenters noted the potential 

misalignment between the timing of 

publication of this final rule and 

submission to OCC of the FFY 2025– 

2027 CCDF State and Territory Plans. 

Some commenters suggested delaying 

the FFY 2025–2027 CCDF Plans or 

having an additional comment period to 

cover an amendment process for the 

rule’s requirements. ACF is aware that 

some provisions in the final rule will 

require a range of internal processes for 

Lead Agencies before full 

implementation and that other 

provisions will require IT and data 

system changes that can take some time. 

Therefore, we are allowing Lead 

Agencies to request temporary 

transitional waivers for extensions of up 

two years if needed to implement 

provisions of the rule. The waivers are 

discussed in greater detail elsewhere in 

this preamble. 

We considered several options to 

align the timing of the FFY 2025–2027 

State and Territory Plans and the 

effective and compliance dates of this 

final rule. We have chosen not to adjust 

the CCDF Plan timeline because all 

changes included in this final rule have 

been incorporated into the forthcoming 

final FFY 2025–2027 CCDF State and 

Territory Plan Preprint—which outlines 

the required elements of a plan 

submission. The FFY 2025–2027 CCDF 

State and Territory Plans must be 

submitted to ACF by July 1, 2024 and 

will be effective October 1, 2024. 

Finally, we received comments from 

several national organizations focused 

on school-age and out-of-school time 

care, requesting we include additional 

data related to school-age care. We have 

incorporated this data in the preamble. 

VI. Section-by-Section Discussion of 

Comments and Regulatory Provisions 

We received comments about changes 

we proposed to specific subparts of the 

regulation. Below, we identify each 

subpart, summarize the comments, and 

respond to them accordingly. 

Subpart A—Goals, Purposes, and 

Definitions 

§ 98.2 Definitions 

The final rule includes three technical 

changes to definitions at § 98.2 and the 

addition of two new definitions. In this 

section, italics indicate defined terms. 

Major Renovation 

This final rule defines major 

renovation as any renovation with a cost 

equal to or exceeding $350,000 in 

federal CCDF funds for child care 

centers and $50,000 in federal CCDF 

funds for family child care homes, with 

annual adjustments for inflation posted 

on the OCC website. Renovations that 

exceed these thresholds but do not make 

significant changes to the structure, 

function, or purpose of the child care 

facility while improving the health, 

safety and/or quality of child care 

services are considered minor 

renovation. This definition applies to all 

CCDF Lead Agencies and will be used 

to determine which projects are 

considered major renovation and which 

are therefore not permitted with State or 

Territorial CCDF or may be permitted 

for Tribal Lead Agencies with prior 

approval from ACF in accordance with 

§ 98.84(b). As before, CCDF prohibits 

States and Territories from using CCDF 

funds for major renovation. Tribes may 

continue to request to use their CCDF 

funds for construction and major 

renovation (Section 658O(c)(6), 42 

U.S.C. 9858m(c)(6)). In response to 

comments described below, this 

definition provides greater flexibility to 

Lead Agencies than the definition 

proposed in the NPRM. 

Comment: A few commenters were 

fully supportive of the original proposal 

and noted it would provide a more 

informative definition, but most 

commenters on this proposal expressed 

support while also requesting more 

clarity and raising significant concerns 

about regional variations in construction 

costs, focusing on the impact of the 

change on Tribal Lead Agencies. They 

noted that the previous definition 

provided needed flexibility for Tribal 

programs to address their facility needs. 

Response: We retain the proposed 

change to the definition of major 

renovation to be based on the cost of 

renovations for better clarity and 

consistent implementation but have 

incorporated components from the prior 

definition to better distinguish between 

minor and major renovations. The 

previous definition for major 

renovation, established in the 1998 

CCDF regulation, focused exclusively on 

the type of change to the facility.62 The 

definition from the 1998 CCDF rule has 

led to confusion in the field, insufficient 

flexibility and inconsistent guidance for 

Lead Agencies and child care providers. 

The final rule accounts for Tribal 

comments on the benefits of keeping the 

description of structural change from 

the previous definition by taking a 

combined approach for the definition, 

such that renovations exceeding the cost 

threshold that do not make changes to 

the structure, function, or purpose of the 

child care facility while improving the 

health, safety and/or quality of child 

care services are still considered minor 

renovations. This will provide greater 

flexibility than what we originally 

proposed to properly address 

geographical differences among Tribal 

Lead Agencies and to help avoid 

increased burden for Tribal Lead 

Agencies making minor renovations that 

are costly due to higher-than-average 


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63https://www.cbre.com/insights/reports/unitedstates-construction-market-trends. 

64For additional information about changes made 

to CCDF mandatory and matching funds in the ARP 

Act of 2021, see CCDF–ACF–IM–2021–04 https://

www.acf.hhs.gov/occ/policy-guidance/arp-actincreased-mandatory-and-matching-funds. 

construction prices in their region.63

Moreover, in general, this rule provides 

greater flexibility for Tribal Lead 

Agencies to make needed renovations 

by eliminating the need for construction 

applications in some instances. 

This final rule also provides more 

flexibility for States and Territories to 

use CCDF funds for allowable minor 

renovations. This clarification may be 

particularly helpful for Territories who 

only recently started receiving 

mandatory funds and may be looking for 

opportunities to use those funds to 

increase and improve the supply of 

child care in their areas. 

Comment: Some commenters noted 

that the proposed threshold for major 

renovation of $250,000 for child care 

centers and $25,000 for family child 

care homes was too low and did not 

account for geographic variations in 

construction and materials costs, 

suggesting specific higher thresholds, 

including $350,000 for centers and 

$50,000 for family child care homes. 

While commenters expressed concerns 

about relying on a specific threshold, 

they were generally supportive of the 

proposal for annual adjustments to the 

threshold based on economic indicators. 

Response: In response to comments, 

we increased the thresholds from the 

levels proposed in the NPRM ($250,000 

for centers and $25,000 for family child 

care providers) to $350,000 for centers 

and $50,000 family child care providers 

in the final rule. We retained the 

proposal to adjust the thresholds 

annually based on inflation and post 

that information on the OCC website. 

Comment: A few commenters 

expressed concern about the proposed 

definition of collective renovation 

proposed in the NPRM, which stated, 

‘‘Renovation activities that are intended 

to occur concurrently or consecutively, 

or altogether address a specific part or 

feature of a facility, are considered a 

collective group of renovation 

activities.’’ These commenters argued 

that applying the proposed renovation 

thresholds to collective renovations 

could undermine development and 

financial planning and needed a more 

nuanced approach. 

Response: We appreciate commenters 

providing additional information and 

input on defining collective renovations 

in the regulatory language. Given the 

complexity of defining collective 

renovations and the potential 

unintended consequences, the final rule 

does not include a definition of 

collective renovation. 

State 

The final rule amends the definition 

of State to mean ‘‘any of the States and 

the District of Columbia and includes 

Territories and Tribes unless otherwise 

specified.’’ The change conforms this 

definition with the new definition of 

Territory included in this final rule. 

This change is technical and does not 

make substantive changes to 

requirements for States, Territories, or 

Tribes. 

Comment: A commenter noted that 

Tribes should not be included in the 

definition of State. 

Response: We share the commenter’s 

concern with including Tribes in the 

definition of State. However, we are 

declining to remove Tribes from the 

definition of State at this time. 

Removing Tribes from the definition of 

State may impact the requirements for 

Tribal Nations, and we do not want to 

make such policy changes without the 

opportunity for public comment. As 

discussed earlier, ACF released a Tribal 

RFI on July 27, 2023 to solicit extensive 

feedback on the regulations and 

processes for Tribal CCDF programs. As 

ACF considers the information gathered 

through the RFI process, we may 

consider potential regulatory changes, 

including revising the definition of 

State. 

Territory 

This final rule adds a definition of 

Territory to mean ‘‘the Commonwealth 

of Puerto Rico, the United States Virgin 

Islands, Guam, American Samoa, and 

the Commonwealth of the Northern 

Mariana Islands.’’ This new definition 

aims to streamline the CCDF 

regulations, particularly where Territory 

funding and allocations are discussed 

but does not change policy requirements 

for Territories. We did not receive 

comments on this change and have 

retained the definition as proposed. 

Territory and Tribal Mandatory Funds 

This final rule updates definitions to 

include the terms Territory mandatory 

funds and Tribal mandatory funds to 

reflect changes made to CCDF 

mandatory and matching funds in the 

ARP Act of 2021 (Pub. L. 117–2). 

Section 9801 of the ARP Act amended 

section 418 of the Social Security Act 

(42 U.S.C. 618(a)(3)) by permanently 

increasing the matching funding for 

States (including the District of 

Columbia), changing the tribal set-aside 

for mandatory funds from between 1 

and 2 percent of funds to a flat $100 

million each fiscal year, and 

appropriating CCDF mandatory funds 

($75 million) to Territories for the first 

time.64 To align the CCDF regulation 

with the new Territory mandatory 

funding statute, the final rule adds a 

new definition for Territory mandatory 

funds at § 98.2 to mean ‘‘the child care 

funds set aside at section 418(a)(3)(C) of 

the Social Security Act (42 U.S.C. 

618(a)(3)(C)) for payments to the 

Territories’’ and revises the definition 

for Tribal mandatory funds to be ‘‘the 

child care funds set aside at section 

418(a)(3)(B) of the Social Security Act 

(42 U.S.C. 618(a)(3)(B)) for payments to 

Indian Tribes and tribal organizations.’’ 

We did not receive comments on this 

technical change and have retained the 

definition as proposed. 

Subpart B—General Application 

Procedures 

Subpart B of the regulations describes 

some of the basic responsibilities of a 

Lead Agency as defined in the Act. A 

Lead Agency serves as the single point 

of contact for the child care subsidy 

program, determines the basic use of 

CCDF funds and priorities for spending 

CCDF funds, and promulgates the rules 

governing overall administration and 

oversight. 

Under Subpart B, this final rule makes 

changes to CCDF Plan provisions, 

including related to assessing child care 

supply and parameters for requesting 

temporary extensions for certain 

provisions. 

§ 98.13—Applying for Funds 

This final rule includes a technical 

change to the regulatory citation at 

§ 98.13(b)(4) from 45 CFR 76.500 to 2 

CFR 180.300 to accurately reflect 

current regulations at 2 CFR 180.300 

governing grants management. We did 

not receive comments on this change. 

§ 98.16 Plan Provisions 

Submission and approval of the CCDF 

Plan is the primary mechanism by 

which ACF works with Lead Agencies 

to ensure program implementation 

meets federal regulatory requirements. 

All provisions required to be included 

in the CCDF Plan are outlined in 

§ 98.16. The additions and changes to 

this section correspond to changes 

throughout the regulations, which 

provide explanation and responses to 

comment for later in this rule. 

Technical Change. This final rule 

includes a technical change at 

§ 98.16(ee) as redesignated. The 

previous regulatory language incorrectly 

said, ‘‘verity eligibility.’’ This was an 


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error, and the final rule is corrected to 

read ‘‘verify eligibility.’’ We did not 

receive comments on this change. 

Presumptive Eligibility. The final rule 

adds a provision at new paragraph 

§ 98.16(h)(5) to require Lead Agencies to 

describe if they have implemented 

presumptive eligibility and, if 

applicable, to describe their 

presumptive eligibility policies and 

procedures, and how they ensure 

minimal barriers for families and 

safeguard funds for eligible children. 

The NPRM proposed additional 

reporting components at § 98.16(h)(5). 

This final rule keeps the reporting 

requirement but includes it as part of 

the ACF–800 annual administrative data 

report at § 98.71 instead of under the 

CCDF Plan. Comments are addressed 

later under the related requirement at 

§ 98.21(e). 

Supply of Child Care. The final rule 

amends § 98.16(x) and adds new 

paragraphs at (y) and (z) to clarify 

section 658E(c)(2)(M) of the Act (42 

U.S.C. 9858c(c)(2)(M)), which addresses 

the lack of supply of child care for 

certain populations, how Lead Agencies 

will identify shortages, and how grants 

or contracts will be used. The final rule 

separates former paragraph (x) into three 

provisions to better convey data 

requirements and strategies to meet the 

statutory requirement for Lead Agencies 

to take steps to increase the supply of 

child care services for children in 

underserved geographic areas, infants 

and toddlers, children with disabilities, 

and children who receive care during 

nontraditional hours. At revised 

paragraph (x), we continue to require 

Lead Agencies to include in their CCDF 

Plans a description of the supply of care 

relative to the population of children 

requiring care regardless of subsidy 

participation, including specifically care 

for infants and toddlers, children with 

disabilities as defined by the Lead 

Agency, children who receive care 

during nontraditional hours, and 

underserved geographic areas. Lead 

Agencies must also list the data sources 

used to identify the shortages. 

At new paragraph (y), the final rule 

requires Lead Agencies to describe their 

strategies and actions to address supply 

shortages identified in paragraph (x) and 

specifically to improve parent choice for 

families eligible to participate in CCDF, 

including for care during nontraditional 

hours (y)(1), infant and toddler care 

(y)(2), and care for children with 

disabilities (y)(3), and in underserved 

geographic areas (y)(4). This description 

must include the Lead Agency’s method 

for tracking progress to increase the 

supply and support parental choice for 

families eligible for CCDF. Supply 

building for each of these types of care 

is specifically required by the statute 

because of the high need and, as the 

final rule reinforces, states must take 

steps to ensure these populations have 

access to child care. 

At new paragraph (z), the final rule 

requires Lead Agencies to describe how 

they will use grants or contracts to build 

supply for children participating in 

CCDF in underserved geographic areas, 

for infants and toddlers, and for 

children with disabilities. The final rule 

makes clear in paragraph (y)(1) that 

Lead Agencies must increase the supply 

of nontraditional hour care for children 

participating in CCDF, but paragraph (z) 

of this section and § 98.30(b) do not 

require Lead Agencies to use grants or 

contracts as a mechanism for building 

supply for this type of care. 

This final rule also adds paragraph 

(aa) to require Lead Agencies to provide 

a description of their activities to 

improve the quality of child care 

services for children in underserved 

geographic areas, infants and toddlers, 

children with disabilities as defined by 

the Lead Agency, and children who 

receive care during nontraditional 

hours. This is an existing requirement 

that was previously included in 

paragraph (x) of this section. 

Comments: Commenters were 

supportive of collecting additional 

information and data on the supply of 

available child care, especially to 

identify the supply shortages that will 

inform the use of grants or contracts to 

increase supply. 

Response: Lead agencies need clear 

data and strategies to address gaps in 

the supply of child care. Therefore, we 

have revised (x) and (y) to collect 

additional information about the data 

States and Territories use to identify 

supply shortages and the strategies used 

to address them and added (z) to 

specifically address how some of these 

supply shortages will be addressed 

through grants and contracts. This final 

rule will allow Lead Agencies and ACF 

to better identify supply shortages and 

determine how Lead Agencies are 

addressing them through various 

methods, including with grants or 

contracts. In agreement with 

commenters, we revised the proposed 

provisions to require that Lead Agencies 

assess the need for care among the 

subgroups identified (i.e., children in 

underserved geographic areas, infants 

and toddlers, children with disabilities 

as defined by the Lead Agency, and 

those needing care during 

nontraditional hours) and then 

determine what proportion of that need 

for children in underserved geographic 

areas, infants and toddlers, and children 

with disabilities would be served with 

grants or contracts. As stated, Lead 

Agencies may also use this data to use 

contracts or grants for those families 

who would benefit from nontraditional 

hour care. 

Comments: Some commenters were 

concerned the proposed removal of ‘‘If 

the Lead Agency chooses to employ 

grants and contracts to meet the 

purposes of this section, the Lead 

Agency must provide CCDF families the 

option to choose a certificate for the 

purposes of acquiring care’’ at § 98.16(x) 

meant that ACF intended to give 

preference to the use of grants or 

contracts over certificates. 

Response: We appreciate commenters 

noting the sentence was removed in the 

NPRM. This omission was an error, and 

in response to these comments, ACF has 

added language at § 98.16(z). The 

regulations do not give preference to the 

use of grants or contracts over 

certificates. The final rule expands 

parents’ options by requiring some 

usage of grants or contracts for direct 

services. 

§ 98.19 Requests for Temporary 

Waivers 

In response to comments expressing 

concerns Lead Agencies would not be 

able to implement this rule’s changes 

within the 60-day effective date, this 

final rule amends the temporary 

transitional and legislative waivers at 

§ 98.19(b)(1), which are authorized by 

section 658I(c) of the Act (42 U.S.C. 

9858g(c)). The rule extends the waivers 

at (i) from a one-year initial period to up 

to a two-year period and amends (ii) to 

specify that the transitional and 

legislative waivers cannot be extended 

and are limited to two years. The final 

rule also revises § 98.19(f) to clarify that 

waiver extensions only apply where 

permitted. These revisions do not 

change the existing parameters 

associated with the transitional and 

legislative waivers, including that 

waivers must be approved by the 

Secretary and are conditional and 

dependent on progress towards 

implementation of the changes included 

in this final rule and should be narrowly 

targeted to those provisions with a 

specific legislative or administrative 

barrier. ACF expects that such requests 

will be limited in scope and tied to a 

specific timeline for implementation. 

Lead Agencies will be expected to 

demonstrate they have a plan to 

implement the requirement for which 

they are granted a waiver and must 

provide regular progress updates. 

We emphasize that Lead Agencies are 

expected to move quickly to implement 

the critical policy changes included in 


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this final rule. Parents urgently need 

relief from high co-payments and more 

child care options and child care 

providers urgently need more stabilizing 

payments and practices. However, we 

are allowing for the use of transitional 

and legislative waivers for the new 

provisions because we recognize that 

some changes will require legislative, 

regulatory changes, and/or IT systems 

investments that can delay full 

implementation. As noted above, 

transitional and legislative waivers will 

only be considered for changes made in 

this final rule. 

Subpart C—Eligibility for Services 

This subpart establishes parameters 

for Lead Agency child eligibility 

determination and re-determination 

procedures. This final rule includes 

changes related to incorporating 

additional children into the family, 

presumptive eligibility, subsidy 

enrollment and applications, and 

verifying CCDF eligibility using other 

programs. 

§ 98.21 Eligibility Determination 

Processes 

Additional Siblings. This final rule 

clarifies at § 98.21(d) that the minimum 

12-month eligibility requirement 

described in § 98.21(a) applies when 

children are newly added to the case of 

a family already participating in the 

subsidy program. This is not a new 

policy: Section 658E(c)(2)(N) (42 U.S.C. 

9858c(c)(2)(N)) of the Act and § 98.21(a) 

do not provide exceptions to the 12- 

month minimum eligibility 

requirement. However, the lack of 

clarity in the 2016 final rule created 

confusion for Lead Agencies and 

inconsistent implementation leading to 

additional children (e.g., newborn or 

school age child needing after school 

care) in the family sometimes receiving 

less than 12 months of care before 

redetermination. The final rule 

addresses the confusion around the 

policy. A conforming change at 

§ 98.16(h)(4) requires Lead Agencies to 

describe their policy related to 

additional children in the CCDF Plan. 

In cases where multiple children in 

the same family have initial eligibility 

determined at different points in time, 

we encourage Lead Agencies to align 

eligibility periods to the new child’s 

eligibility period so that all the 

children’s re-determinations can occur 

at the same point in time to limit burden 

on the family and the Lead Agency. This 

alignment can be done by extending the 

eligibility period for the existing child 

or children beyond 12 months. Lead 

Agencies are not required to conduct a 

full eligibility determination when 

adding an additional child to the 

family’s case and recommends the Lead 

Agency leverage existing eligibility 

verification about the family and require 

only necessary information about the 

additional child (e.g., proof of 

relationship, provider payment 

information). 

Comment: Most commenters on this 

provision endorsed ACF’s 

recommendation to align the eligibility 

periods of all the family’s children to 

the additional child’s eligibility period 

so re-determinations can occur at the 

same point in time. A few expressed 

concerns about logistical barriers and 

technical changes required for systems 

to track eligibility at the child-level 

rather than the family-level. In addition, 

one Lead Agency asked for clarification 

of the expectations of this policy. 

Response: We are encouraged that 

most commenters on this proposed 

change endorsed extending the 

eligibility period for children in a family 

already receiving child care subsidies to 

align with an additional child’s 

eligibility period. Under the Act in 

Section 658E(c)(2)(N)(i), once 

determined eligible, children must 

receive a minimum of 12 months of 

child care services, unless family 

income rises above 85 percent of state 

median income (SMI) or, at Lead 

Agency option, the family experiences a 

non-temporary cessation of work, 

education, or training. Lead Agencies 

that implement policies that result in 

eligibility periods of less than 12 

months for additional children would 

be out of compliance with the minimum 

12-month eligibility requirement. We 

have made no change to the proposed 

language. 

Lead Agencies have the flexibility to 

establish eligibility periods longer than 

12 months, a flexibility that allows the 

eligibility period for existing children to 

align with an additional child’s 

eligibility period. Alternatively, Lead 

Agencies may track separate eligibility 

periods for each individual child in the 

family receiving child care subsidies, 

though ACF discourages this approach 

because it can confuse families and be 

administratively burdensome for 

families, providers, and Lead Agencies. 

Comment: Commenters supported our 

recommendation to leverage existing 

family information to verify an 

additional child’s eligibility for child 

care subsidies. 

Response: As we described in the 

proposal, our intention is to reduce the 

administrative burden for families and 

Lead Agencies. We encourage Lead 

Agencies to implement additional 

policies that require only the minimum 

amount of information from families to 

verify an additional child’s eligibility. 

Lead Agencies may assume that family 

information collected at the time of an 

existing child’s eligibility determination 

(e.g., family income, working or 

attending job training or educational 

program) applies to an additional 

child’s eligibility. 

Comment: Commenters supported 

adding the requirement for Lead 

Agencies to describe their additional 

child policies in their triennial CCDF 

Plans. 

Response: We agree that including a 

description of additional children or 

sibling policies in the CCDF Plans will 

lead to more transparency, more 

consistent implementation, and reduce 

confusion among families, providers, 

and Lead Agencies. No changes were 

made to the proposed language. 

Presumptive Eligibility. This final rule 

adds a provision at § 98.21(e) to clarify 

that, at a Lead Agency’s option, a child 

may be considered presumptively 

eligible for subsidy prior to full 

documentation and verification of the 

Lead Agency’s eligibility criteria and 

eligibility determination. Presumptive 

eligibility is an important tool Lead 

Agencies can use to reduce burden on 

families and ensure timely access to 

reliable child care assistance. At least 

six CCDF Lead Agencies currently allow 

presumptive eligibility. The rule makes 

changes to encourage more Lead 

Agencies to implement presumptive 

eligibility by improving clarity about 

CCDF rules, including that payments 

made with CCDF funds are allowable for 

any child ultimately determined eligible 

except in cases of fraud or intentional 

program violations. 

Therefore, this final rule clarifies that 

Lead Agencies may define a minimum 

presumptive eligibility criteria and 

verification requirement for considering 

a child eligible for child care services 

for up to three months, while full 

eligibility verification is underway. To 

be determined presumptively eligible, a 

child must be plausibly assumed to 

meet each of the basic federal 

requirements, and at the Lead Agency’s 

option, the basic requirements defined 

in the Lead Agency’s CCDF Plan, in 

accordance with § 98.20 (i.e., age; 

income; qualifying work, education, or 

training activity or receiving or needing 

to receive protective services; and child 

citizenship). Lead Agencies have the 

flexibility to collect minimal 

information to determine presumptive 

eligibility and are not required to fully 

verify the simplified eligibility 

information at the time of presumptive 

eligibility determination. 

The final rule further specifies that 

federal CCDF payments may be made 


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for presumptively eligible children and 

those payments, up to the point of final 

eligibility determination, will not be 

considered an error or improper 

payment if a child is ultimately 

determined to be ineligible and will not 

be subject to disallowance, except in 

cases of fraud or intentional program 

violation so long as the payment was 

not for a service period longer than the 

period of presumptive eligibility. Lead 

Agencies adopting presumptive 

eligibility are required to implement a 

minimum verification process that 

incorporates criteria that reduces the 

likelihood of error and fraud. A 

conforming change at § 98.71(b)(5) 

requires Lead Agencies implementing 

presumptive eligibility to track and 

report in their annual aggregate 

administrative report the number of 

presumptively eligible children 

ultimately determined to be fully 

eligible, the number for whom the 

family does not complete the 

documentation for full eligibility 

verification, and the number who turn 

out to be ineligible. We recommend 

Lead Agencies use these and other 

sources of data to ensure funds are 

safeguarded for eligible children and 

negative impacts on providers are 

minimized. In addition, the final rule 

includes a conforming change at 

§ 98.16(h)(5) requiring Lead Agencies to 

describe their presumptive eligibility 

policies and procedures in their CCDF 

Plans, including information on how 

they ensure minimal barriers for 

families and safeguard funds for eligible 

children. 

The change at § 98.21(e) allows Lead 

Agencies to use presumptive eligibility 

to provide quicker access to child care 

assistance for families, while reducing 

perceived financial risk and 

administrative burden for the Lead 

Agency by clarifying that CCDF funds 

may be used to cover presumptive 

eligibility payments if appropriate 

safeguards are in place. This policy 

further reduces financial risk by 

requiring Lead Agencies to limit the 

presumptive eligibility period to three 

months, to set presumptive eligibility 

criteria and minimum verification 

requirements that ensure families 

receiving care during a period of 

presumptive eligibility are feasibly 

eligible and minimize the likelihood 

that they are later found to be ineligible 

for CCDF, and to track the number of 

families who do not submit 

documentation and both the number of 

children ultimately determined eligible 

and ineligible. We note that the threemonth period is a maximum 

presumptive eligibility period. Lead 

Agencies may establish presumptive 

eligibility policies for shorter periods 

and establish distinct periods for 

families to submit documentation and 

for Lead Agencies to process 

applications, provided that the 

combined duration does not exceed 

three months. Lead Agencies must end 

assistance for families once they are 

determined to be ineligible, even if that 

determination is completed in under 

three months. 

As part of the proposed changes 

associated with implementing 

presumptive eligibility, the NPRM 

proposed adding a new paragraph at 

§ 98.21(a)(5)(iv) that included a final 

determination of ineligibility after an 

initial determination of presumptive 

eligibility as one of the limited reasons 

a Lead Agency may choose to end 

assistance before the end of the 12- 

month eligibility period. We have not 

included this change in the final rule. 

As proposed, this language suggested 

that it was Lead Agency option whether 

to terminate assistance for a child once 

they were found ineligible. Rather, as 

stated above, Lead Agencies must end 

federal CCDF assistance once a child is 

determined to be federally ineligible 

according to § 98.21(a). 

Effective internal controls around 

presumptive eligibility processes are 

important to safeguard funds for CCDF 

eligible children. As described in 

§ 98.21(e)(5), when a Lead Agency is 

under a corrective action plan for error 

rate reporting, ACF will consider 

contextual factors around the error rate 

findings and other sources of 

information to determine if the Lead 

Agency can continue to use CCDF funds 

for direct services under presumptive 

eligibility. ACF recommends that Lead 

Agencies have a continuous quality 

assurance process to ensure their 

presumptive eligibility policies meet the 

needs of their eligible population while 

also ensuring effective internal controls. 

When children are newly added to the 

case of a family already participating in 

the subsidy program (e.g., new siblings) 

as discussed at § 98.21(d), Lead 

Agencies may implement presumptive 

eligibility for the additional child while 

waiting for necessary additional 

information (e.g., proof of relationship, 

provider payment information), but, as 

discussed earlier, ACF recommends that 

Lead Agencies leverage existing family 

eligibility verification as much as 

possible to determine the additional 

child’s presumptive and full eligibility 

and add the additional children to the 

program. 

Comment: Most comments received 

on this proposal supported the 

presumptive eligibility provisions. 

Some commenters requested ACF 

clarify if the intent of presumptive 

eligibility is a strategy to reduce stress 

for families already enrolled or to 

increase the number of families entering 

the subsidy system. A few commenters 

opposed the proposal due to concerns 

about limited funding and supply, as 

well as increased work for eligibility 

staff. 

Response: We are pleased by the 

support for the presumptive eligibility 

provisions. The primary intention of 

presumptive eligibility policies is to 

minimize family burden to quickly 

access child care services for children 

who are feasibly federally eligible for 

CCDF. We understand that Lead 

Agencies will need to consider potential 

benefits and costs when deciding 

whether to institute a presumptive 

eligibility policy and when crafting such 

policies. As a reminder, Lead Agencies 

are not required to adopt presumptive 

eligibility, and, for those who do, there 

are significant flexibilities to establish 

specific policies and procedures, as 

discussed in more detail below. As 

stated before, there is evidence of the 

substantial benefit to families if Lead 

Agencies implement presumptive 

eligibility, and the modifications to this 

policy in the final rule are meant to 

ensure that the level of risk to the Lead 

Agency is minimal in doing so. 

Therefore, Lead Agencies are 

encouraged to consider presumptive 

eligibility policies among other 

strategies to reduce barriers to 

enrollment, particularly for vulnerable 

populations, including families 

experiencing homelessness. 

Comment: We requested comment on 

whether three months was an 

appropriate length of time for 

presumptive eligibility. We also asked 

for data on the average amount of time 

it currently takes to process 

applications. We received many 

comments endorsing three months as an 

appropriate length of time. One 

commenter indicated that 90 days for 

verification seemed too long and 

recommended 60 days as a more 

reasonable timeframe, but also 

acknowledged that some situations 

including self-employment and 

homelessness may warrant more time 

for verifications. One State Lead Agency 

recommended flexibility to determine 

an appropriate length up to three 

months. Two commenters 

recommended a timeline for families to 

submit documentation to be separate 

from a timeline for Lead Agencies to 

process applications. Data received 

around the average amount of time 

taken to process applications was 

varied: estimates ranged from one 


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month, two months, or more to process 

applications. 

Response: We appreciate commenters 

providing data and support for the 

proposed timeframe and have decided 

to retain the three-month presumptive 

eligibility period. If a Lead Agency 

chooses to allow presumptive eligibility, 

they may establish shorter timeframes, 

but cannot exceed three months. ACF 

encourages Lead Agencies to consider 

the timing for the families they serve to 

submit documentation and for 

application processing when making 

decisions about the total length of time 

within a three-month period they would 

like to establish for their presumptive 

eligibility policies and processes. 

Comment: Multiple commenters 

endorsed allowing Lead Agencies 

flexibilities for implementing 

presumptive eligibility, including 

defining criteria for awarding 

presumptive eligibility and setting a 

period shorter than three months. Other 

commenters argued that presumptive 

eligibility should be a requirement, not 

a state option. Other commenters 

expressed concerns about unintended 

consequences on other policies or 

processes, including concerns about 

existing wait times that approach the 

three-month limit for presumptive 

eligibility and enrollment in other 

benefits programs. 

Response: We agree with commenters 

that Lead Agencies should have 

flexibility in whether and how they 

implement presumptive eligibility and 

have kept these flexibilities in the final 

rule. While the potential benefit to 

families could be substantial with its 

adoption, Lead Agencies are not 

required to use presumptive eligibility 

and will not be subject to penalties if 

they do not offer it. Lead Agencies also 

have the flexibility to define the 

documentation and verification 

necessary to determine a child’s 

presumptive eligibility in such a way to 

increase the likelihood that eligible 

families are receiving presumptive 

eligibility. For example, Lead Agencies 

may choose to use eligibility criteria for 

a family’s enrollment in another benefits 

program as verification for presumptive 

eligibility for CCDF benefits (see a 

discussion of how enrollment in other 

benefits programs applies to full 

eligibility verification below). 

Lead Agencies also have flexibility to 

establish the duration of presumptive 

eligibility, provided it does not extend 

beyond 3 months, or how frequently a 

family could be approved for 

presumptive eligibility. Much like the 

flexibilities for full eligibility 

determination, Lead Agencies have the 

flexibility of defining when presumptive 

eligibility begins, such as allowing 

presumptive eligibility on the date it is 

determined or on the date that the child 

care services begin. Lead Agencies also 

have flexibility on for whom they allow 

it (e.g., children with disabilities, 

children receiving or needing to receive 

protective services, other priority 

populations), though we would 

recommend that Lead Agencies 

thoughtfully consider why presumptive 

eligibility would be allowed for some 

groups and not others. 

We understand several Lead Agencies 

already use presumptive eligibility, and 

our intention is not to require 

burdensome changes to existing 

presumptive eligibility policies. 

However, we do expect that Lead 

Agencies implementing presumptive 

eligibility, both those with new and 

existing policies, regularly evaluate the 

effectiveness of their presumptive 

eligibility policies and employ the 

flexibilities in such a way to ensure that 

CCDF funding is safeguarded for eligible 

children. 

Comment: Multiple commenters 

endorsed the requirement to track and 

assess the number of presumptively 

eligible children who are ultimately 

determined ineligible as a commitment 

to accountability and continuous 

improvement. A few commenters 

recommended also requiring Lead 

Agencies to track the number of 

presumptively-eligible families who do 

not submit paperwork to prove their 

eligibility. Another commenter 

recommended gathering disaggregated 

demographic data related to tracking 

presumptive eligibility to reveal equity 

gaps in access and requiring Lead 

Agencies to report the child care supply 

by specific demographic variables (e.g., 

race and ethnicity, geographic location, 

disability). 

Response: In response to these 

comments, the final rule adds a 

requirement at § 98.71(b)(5) for Lead 

Agencies that choose to offer 

presumptive eligibility in their CCDF 

program to report in the ACF–800 

(annual aggregate report) the number of 

presumptively eligible children 

ultimately determined eligible, the 

number for whom the family does not 

complete documentation, and the 

number who are determined ineligible. 

This was initially proposed as an 

addition to the CCDF Plan Preprint at 

§ 98.16(h)(5), but we have determined 

the ACF–800 is a more appropriate 

reporting mechanism for this 

information. Although we considered 

requiring additional disaggregated 

demographic and supply data to 

evaluate equity in presumptive 

eligibility, we are not making other 

changes so as to minimize 

administrative burden and encourage 

Lead Agency uptake. Nonetheless, we 

encourage Lead Agencies to collect 

these types of data to better assess 

whether their presumptive eligibility 

policies and procedures support 

equitable access to child care across the 

populations of eligible children they 

serve. 

Comment: Multiple commenters 

expressed concerns about disruptions in 

care if a presumptively-eligible family is 

found ineligible, and the potential harm 

to children, families, and providers. One 

commenter questioned if Lead Agencies 

could use full eligibility determination 

processes with multiple sets of criteria 

when determining eligibility for 

children receiving child care services 

under presumptive eligibility. Another 

commenter asked how presumptive 

eligibility would interact with paying 

providers in advance of delivery of care 

if a final ineligibility determination 

were made after a payment was issued 

but before the period of service closes. 

Response: Presumptive eligibility is 

intended to support feasibly eligible 

children to receive child care benefits 

more quickly than waiting for a 

complete review of full eligibility, but 

Lead Agencies are expected to execute 

full eligibility determination and use the 

same opportunities for verification for 

families who do not enter the program 

with presumptive eligibility. We 

understand concerns about the potential 

negative impact on families and 

providers if a child is ultimately found 

to be ineligible after receiving benefits 

under a presumptive eligibility period 

or if the presumptive eligibility period 

ends prior to a final determination, but 

the benefits of presumptive eligibility 

benefits to families are considerable. 

If a child is found to be ineligible due 

to eligibility requirements established 

by the Lead Agency, but still qualifies 

under federal requirements (i.e., if the 

Lead Agency sets income eligibility 

below 85 percent of SMI, but the family 

income is still lower than the federal 

threshold), the Lead Agency could 

implement a policy allowing CCDF 

funds to be used to provide child care 

benefits for the remainder of the 

presumptive eligibility period for up to 

three months. The prohibition on using 

CCDF funds to provide child care 

assistance to children who are not 

eligible under federal limits does not 

preclude the Lead Agency from using 

other funds, such as State general 

revenue funds or federal funds like 

Social Services Block Grant funds, to 

provide a grace period of care for 

families to make other arrangements 

before their child care benefits end. We 


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65Lee, R., Gallo, K., Delaney, S., Hoffman, A., 

Panagari, Y., et al. (2022). Applying for child care 

benefits in the United States: 27 families’ 

experiences. US Digital Response. https://www.

usdigitalresponse.org/projects/applying-for- childcare-benefits-in-the-united-states-27-familiesexperiences. 

note that State funds used to provide 

subsidies for children who do not meet 

federal eligibility requirements cannot 

be used to meet the required 

maintenance of effort or State portion of 

the CCDF match. 

Regarding interactions between 

presumptive eligibility and provider 

payment policies, the requirement for 

provider payment policies to reflect 

generally-accepted payment policies at 

§ 98.45(m) applies to payments for

children receiving care during a period

of presumptive eligibility. This includes

being paid prospectively and based on

enrollment not attendance. If a child is

ultimately determined to be federally

ineligible for CCDF, the Lead Agency

cannot require the child care provider to

return funds if the child was properly

enrolled, except for in cases of fraud.

Comment: One commenter expressed 

concerns that a corrective action finding 

for improper payments would preclude 

a Lead Agency from adopting 

presumptive eligibility unless the cause 

of the errors is related to the Lead 

Agency’s ability to perform presumptive 

eligibility for purposes of CCDF. 

Response: Our intent was to use error 

rate findings as a proxy for sufficient 

internal controls to adequately execute 

the increased complexity of 

incorporating presumptive eligibility, 

not abruptly deny a Lead Agency’s 

ability to offer presumptive eligibility 

because of unrelated error rate findings. 

As a result of this comment, we revised 

this language in the final rule to allow 

for a more considered approach to 

determining if a Lead Agency has 

effective internal controls to justify a 

more complex eligibility policy that 

includes presumptive eligibility. While 

we retain the authority to deny a Lead 

Agency with a corrective action finding 

for improper payments the option to 

implement presumptive eligibility if 

warranted by an analysis of the Lead 

Agency’s internal controls, the revised 

language allows flexibility for ACF to 

evaluate the contextual factors around 

the error rate reporting as well as other 

sources of data to approve the use of 

presumptive eligibility policies and 

develop a robust corrective action plan 

in partnership with the Lead Agency 

that will ensure funds are safeguarded 

for CCDF eligible children. 

Comment: Several commenters 

endorsed the proposal that payments to 

providers would not be deemed 

improper payments if a child is 

ultimately determined to be ineligible 

after the full determination process. 

During our consultation with Tribal 

Leaders and Tribal communities, one 

Tribal Leader expressed concern about 

whether Tribal Lead Agencies would be 

responsible for funds determined to be 

spent in cases of fraud and intentional 

program violations. 

Response: We agree with the 

commenters and retained this language 

in the final rule to be explicit that if a 

child meets the Lead Agency defined 

policies for presumptive eligibility 

enrollment and verification, then the 

child is considered eligible for CCDF 

during the period of presumptive 

eligibility. A final determination of 

ineligibility for CCDF would not 

retroactively alter this initial period of 

eligibility or require the Lead Agency to 

return CCDF funds to ACF, nor would 

a family or provider who acted in good 

faith be responsible for these payments. 

CCDF funds are allowed to be used to 

pay for provider payments as long as the 

child meets the requirements for 

presumptive eligibility, has not been 

determined ineligible to receive CCDF 

benefits from the Lead Agency, and has 

not been receiving CCDF benefits under 

presumptive eligibility for more than 

three months. The final rule adds a 

clarification that these flexibilities apply 

so long as the payment for services for 

a presumptively eligible child was not 

for a period longer than the period of 

presumptive eligibility. 

In cases of fraud or intentional 

program violation, the requirements for 

presumptive eligibility remain the same 

as for full eligibility. Regulations at 

§ 98.60(i) require Lead Agencies to

recover child care payments that are the

result of fraud. The payments shall be

recovered from the party responsible for

committing the fraud. For other

overpayments that do not result from

fraud, the Lead Agency has flexibility

under federal rules regarding whether to

recoup the funds.

Comment: We received a few 

comments related to best practices for 

communicating with and supporting 

families navigating the presumptive 

eligibility process to avoid unwarranted 

findings of being ineligible. 

Response: The commenters’ 

suggestions align with the consumer 

education goals of CCDF as well as with 

the newly amended redesignated 

provision at § 98.21(f), aimed to reduce 

family burden around application 

processes. Lead Agency requirements 

for consumer education at § 98.33 and 

application processes are applicable to 

presumptive eligibility child care 

services. Therefore, we did not make 

any additional changes based on these 

comments. 

Comment: A commenter requested 

clarification about whether the intent is 

to allow presumptive eligibility when 

adding a child to an existing family 

receiving subsidy or only during the 

initial application period for the 

household. 

Response: Our primary intent is for 

Lead Agencies to implement 

presumptive eligibility for a family’s 

initial application for child care 

subsidies to hasten their access to child 

care benefits. As discussed above, we 

encourage Lead Agencies to implement 

additional child policies that require the 

minimum amount of information to 

verify an additional child’s eligibility. 

However, incorporating presumptive 

eligibility policies while waiting to 

verify that minimum information (i.e., 

proof of relationship, provider payment 

information) is consistent with our goals 

of reducing bureaucratic hurdles for 

families. 

Reducing Family Burden in 

Application Processes: To make it easier 

for eligible families to access child care 

services, and in alignment with 

provisions of the Act requiring States 

and Territories to develop procedures 

and policies that ‘‘ensure that working 

parents . . . are not required to unduly 

disrupt their employment in order to 

comply with the State’s or designated 

local entity’s requirements for 

redetermination of eligibility for [CCDF] 

assistance,’’ (42 U.S.C. 9858c(c)(2)(N)) 

the final rule at § 98.21(f) as 

redesignated, requires Lead Agencies to 

implement eligibility policies and 

procedures that minimize disruptions to 

parent employment, education, or 

training opportunities, to the extent 

practicable. Policies that lessen the 

burden of CCDF administrative 

requirements on families applying for 

child care assistance increase access to 

child care and can improve families’ 

economic well-being. Parents report that 

some of the biggest challenges are long 

waits at inconvenient times to apply inperson and gathering and submitting the 

necessary documents.65 Not 

surprisingly, parents also report online 

application options can be more 

convenient, less stressful, and prove 

especially useful in reducing the burden 

of document submission. 

Thus, the final rule provides that Lead 

Agencies seek strategies to reduce these 

administrative burdens on families, 

including, to the extent practicable, by 

offering an online subsidy application 

option. Currently, only 33 States offer 

online subsidy applications. OCC 

released a CCDF model application in 

2022, which includes practices for 


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66https://childcareta.acf.hhs.gov/full-modelapplication. 

67Meade, E., Gillibrand, S., & Weeden, J. (2023). 

Lost in the Labyrinth: Helping Parents Navigate 

Early Care and Education Programs, Washington, 

DC: New America Foundation. https://www.new

america.org/new-practice-lab/briefs/lost-in-thelabyrinth-helping-parents-navigate-early-care-andeducation-programs/. 

defining, collecting, and verifying 

eligibility information, using best 

practices that limit burden on 

families.66 Lead Agencies without 

online subsidy applications will be 

expected to demonstrate in their CCDF 

Plans why implementation of an online 

subsidy application is impracticable. 

Nevertheless, OCC urges Lead Agencies 

that do not yet offer online applications 

to consider doing so given the 

substantial benefit to families and the 

Lead Agencies’ ability to benefit from 

the model application developed by 

OCC. 

Additionally, as Lead Agencies 

consider ways to lessen the burden on 

families seeking assistance from CCDF, 

they are encouraged to develop 

screening tools to help families 

determine whether they are eligible for 

CCDF assistance, or other publicly 

available benefits (e.g., Temporary 

Assistance for Needy Families (TANF) 

or Supplemental Nutrition Assistance 

Program (SNAP)) and then link directly 

to applications for these programs.67

Comment: Most commenters 

supported the proposal related to 

simplified enrollment and easing 

burden of application processes and 

offered additional proposals to support 

the goal. Several commenters who 

supported the proposal also urged ACF 

to require all Lead Agencies offer, at a 

minimum, both paper and online 

applications. In addition, commenters 

offered suggestions about how to 

increase accessibility and availability of 

applications for families seeking child 

care subsidies. Some commenters 

recommended that online applications 

be accessible via mobile devices given 

families’ reliance on mobile phones to 

access online content. Some 

commenters also recommended that 

applications be available in multiple 

languages and through verbal and case 

note documentation for non-English 

speaking applicants, accessible for 

individuals with disabilities, in plain 

language or at an appropriate literacy 

level, and subject to usability testing 

where feasible. We received several 

comments calling for in-person or 

individualized support to help parents 

through the application process and one 

commenter mentioned the importance 

of customer service training. Several 

commenters offered suggestions to 

cross-link the application with other 

resources so that prospective families 

can have access to information on 

additional resources as well. These 

suggestions included linking the 

application to the consumer education 

and provider search websites and 

making information about services for 

families experiencing homelessness 

more prominent in the materials. 

Commenters also suggested making 

more flexible documentation 

requirements for income verification for 

people with informal employment or gig 

workers and for grandfamilies and the 

use of documents like tax returns and 

pay stubs to verify eligibility. 

Response: We recognize burdensome 

application processes discourage 

families from applying for child care 

assistance, delay access to child care, 

and can cause substantial stress to 

parents. While we decline to require 

Lead Agencies use mobile-friendly or 

linked applications, we strongly 

encourage Lead Agencies to carefully 

consider implementing processes that 

make it easier for families to access and 

navigate enrolling in CCDF, including 

mobile-friendly applications. As 

previously noted, States and Territories 

that do not use online applications will 

be required to describe why it is 

impracticable in their CCDF Plans. 

We also remind Lead Agencies that 

CCDF expenditures for the 

establishment and maintenance of child 

care information systems, including the 

development of an online application, 

are an allowable CCDF expenditure and 

are not considered child care 

administrative activities and thus do not 

apply to the administrative activities 

cap for CCDF funds. Likewise, activities 

that provide one-on-one support for 

families in submitting applications and 

providing access to transparent and easy 

to understand consumer education 

resources are considered quality 

expenditures. We also recommend Lead 

Agencies consider flexibilities for 

families that may have difficulties 

obtaining standard documentation. Lead 

Agencies have considerable flexibility 

in establishing the eligibility and 

verification requirements for families. 

We recommend Lead Agencies consider 

a wide range of circumstances in which 

families may be able to verify their 

eligibility. 

Comment: Several commenters 

requested that we reiterate existing 

flexibilities meant to ease administrative 

burdens and support continuity of care 

that were not addressed in the NPRM. 

Some commenters specifically called for 

the final rule to clarify that hours of care 

do not have to match the hours of the 

eligible activity. 

Response: We appreciate the 

recommendations to remind Lead 

Agencies of their considerable 

flexibilities in implementing their CCDF 

programs but did not make additional 

changes to the rule. Section 98.21(g) of 

the rule remains unchanged from 

current regulations and explicitly states 

that Lead Agencies are not required to 

limit authorized child care services 

strictly based on the work, training, or 

educational schedule of the parent(s) or 

the number of hours the parent(s) spend 

in qualifying activities. We therefore 

reiterate that Lead Agencies do not have 

to match the hours of care for a child 

participating in CCDF with the parent’s 

work, training, or education schedule, 

which may limit participating children’s 

access to high-quality settings and does 

not support the fixed costs of providing 

care so it can contribute to provider 

instability and reluctance to serve 

families with subsidies. 

Eligibility Verification through Other 

Programs: This final rule describes at 

§ 98.21(g), as redesignated, some Lead

Agency options to simplify eligibility

verification. Families receiving child

care assistance are likely to be receiving

or eligible to receive services from other

benefits programs and coordination

with other benefit programs can

simplify eligibility determinations,

ensure families can access all available

benefits, and better support family wellbeing. Using enrollment in other benefit

programs to verify CCDF eligibility

reduces duplication of effort on the part

of families and streamlines the

eligibility determination process for

Lead Agencies, thereby reducing burden

on both sides. Such policies can also

reduce the amount of time families have

to wait to access child care services

while Lead Agencies process eligibility

determinations that are redundant to

determinations made by other benefit

programs. This policy is also a logical

next step if Lead Agencies act on the

encouragement in this final rule to

develop screening tools to help families

determine whether they are eligible for

CCDF assistance, or other publicly

available benefits (e.g., TANF or

Supplemental Nutrition Assistance

Program (SNAP)). Twenty-three States

and Territories currently use

documentation from and enrollment in

other benefit programs to determine

CCDF eligibility for at least one

eligibility component, based on data

from the FFY 2022–2024 CCDF State

and Territory Plan.

This final rule clarifies in § 98.21(g)(1) 

and (2), as redesignated, that Lead 

Agencies have flexibility to use 

enrollment in other benefit programs to 

satisfy specific components of CCDF 


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68https://www.acf.hhs.gov/occ/data/fy-2020- 

preliminary-data-table-2. 

eligibility without additional 

documentation (e.g., income eligibility, 

work, participation in education or 

training activities, or residency) or to 

satisfy CCDF eligibility requirements in 

full if eligibility criteria for other benefit 

programs is completely aligned with 

CCDF requirements. In § 98.21(g)(2), 

Lead Agencies are expressly permitted 

to examine eligibility criteria of benefit 

programs in their jurisdictions to 

predetermine which benefit programs 

have eligibility criteria aligned with 

CCDF. Once programs are identified as 

being aligned with CCDF income and 

other eligibility requirements, Lead 

Agencies have the option to use the 

family’s enrollment in such public 

benefit program to verify the family’s 

CCDF eligibility according to § 98.68(c) 

or to limit the documentation required 

to fulfill CCDF eligibility if the programs 

are not in complete alignment. For 

example, income eligibility for TANF 

cash assistance (42 U.S.C. 601 et seq.) 

meets the federal CCDF income 

eligibility requirements and enrollment 

in either program could demonstrate 

income eligibility for CCDF without any 

additional documentation from a family. 

Due to State, Territory, and Tribal 

variation in eligibility thresholds by 

individual benefit programs, the first 

step to streamlining eligibility is for 

Lead Agencies to use their own 

jurisdiction-specific information on 

income eligibility to determine if a child 

is eligible for subsidy based on 

enrollment in that other program. 

Comment: Commenters were 

generally supportive of encouraging 

Lead Agencies to verify eligibility 

through families’ enrollment in other 

benefits programs, noting several Lead 

Agencies were already implementing or 

preparing to use this flexibility to 

varying degrees. Some commenters 

appreciated the flexibility for Lead 

Agencies to self-identify which 

verification requirements aligned 

between CCDF and other benefits 

programs. Many commenters supported 

the flexibility that if the eligibility 

criteria for other benefit programs 

within the Lead Agency’s jurisdiction 

are completely aligned with CCDF 

requirements, this can satisfy CCDF 

eligibility requirements in full for those 

families or establish CCDF eligibility 

policies using the criteria of other 

public benefits programs. 

Response: We are encouraged by 

support for reducing bureaucratic 

barriers for families and Lead Agencies 

and the benefits that streamlining 

program will have for families. In 

response, we retained the proposed 

language. 

Comment: One commenter cautioned 

against adding requirements to CCDF 

eligibility verification that increase the 

bureaucratic burden for families and 

providers. 

Response: We agree with the 

commenter, which is why this rule 

seeks to reduce bureaucratic and 

paperwork burdens for families and 

Lead Agencies in determining a child’s 

eligibility to receive child care 

subsidies. CCDF regulations at 

§ 98.20(b)(4) allow the Lead Agency to 

establish additional eligibility 

conditions or priority rules so long as 

they do not ‘‘impact eligibility other 

than at the time of eligibility 

determination or re-determination.’’ We 

recommend Lead Agencies reconsider 

families’ engagement with other benefits 

programs, such as child support, as 

preconditions for CCDF eligibility as 

this likely increases the bureaucratic 

burden for families and Lead Agencies. 

Moreover, when Lead Agencies use data 

from other benefits programs to verify 

CCDF eligibility requirements, Lead 

Agencies must ensure that the 

information is only acted upon at 

eligibility determination or redetermination and cannot be used to 

discontinue child care subsidies during 

the eligibility period. For example, a 

Lead Agency that requires child support 

cooperation as an additional CCDF 

eligibility requirement, can only assess 

cooperation at the time of CCDF 

eligibility determination or redetermination and cannot use failure to 

cooperate as a reason to discontinue 

child care subsidies between eligibility 

determination or re-determination. 

Technical Change: This final rule 

corrects a grammatical error by adding 

the word ‘‘on’’ at § 98.21(a)(2)(iii). The 

revised language now reads, ‘‘If a Lead 

Agency chooses to initially qualify a 

family for CCDF assistance based on a 

parent’s status of seeking employment 

or engaging in job search’’ (emphasis 

added). We did not receive comments 

on this correction. 

Subpart D—Program Operations (Child 

Care Services) Parental Rights and 

Responsibilities 

Subpart D of the regulations describes 

parental rights and responsibilities and 

provisions related to parental choice, 

including parental access to their 

children, requirements that Lead 

Agencies maintain a record of parental 

complaints, and consumer education 

activities carried out by Lead Agencies 

to increase parental awareness about the 

range of available child care options. 

This final rule amends this subpart to 

require Lead Agencies use some grants 

or contracts for direct services, post 

information about sliding fee scales on 

consumer education websites, and it 

clarifies requirements on posting full 

monitoring reports and aggregate data. 

§ 98.30 Parental Choice 

Section 98.30(b) clarifies section 

658E(c)(2)(A) of the Act (42 U.S.C. 

9858c(c)(2)(A)), which identifies the use 

of grants or contracts as a key element 

of parental choice of child care 

providers. This statutory provision 

states that a parent shall have the option 

‘‘to enroll such child with a child care 

provider that has a grant or contract for 

the provision of such services,’’ or to 

receive a child care certificate. As well, 

section 658E(c)(2)(M) (42 U.S.C. 

9858c(c)(2)(M)) requires Lead Agencies 

to ‘‘develop and implement strategies 

(which may include . . . the provision 

of direct contracts or grants to 

community-based organizations . . .) to 

increase the supply and improve the 

quality of child care services’’ for 

certain underserved populations. Only 

10 States and Territories report using 

any grants and contracts for direct 

services, and only six States and 

Territories report supporting more than 

5 percent of children receiving subsidy 

via a grant or contract even though they 

are required by the Act and can be one 

of the most effective tools to build 

supply in underserved geographic areas 

and for underserved populations.68

Therefore, the final rule at § 98.30(b) 

clarifies the statutory requirement by 

stating that States and Territories are 

required to provide some direct child 

care services through grants or 

contracts, including at a minimum, 

using some grants or contracts for 

children in underserved geographic 

areas, infants and toddlers, and children 

with disabilities. The final rule requires 

some use of grants or contracts for each 

of these populations because of the 

particularly stark supply issues that lead 

to minimal parent choice. ACF 

encourages Lead Agencies to also 

consider other populations that may 

benefit from grants or contracts, 

including care for children during 

nontraditional hours. 

Comment: Commenters strongly 

supported the proposal to require Lead 

Agencies use some grants and contracts 

for direct services, noting they support 

a more stable and equitable child care 

system, and many requested additional 

clarifications and suggested revisions. A 

bicameral Congressional comment also 

supported this provision and 

specifically noted ACF’s authority to 

require some use of grants or contracts. 


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15382 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 

69Adams, G. et al., ‘‘Executive Summary: What 

Child Care Arrangements Do Parents Want during 

Nontraditional Hours? ’’: https://www.urban.org/ 

projects/informing-policy-decisions-aboutnontraditional-hour-child-care. 

70Bipartisan Policy Center. (January 2021). 

Payment Practices to Stabilize Child Care. https:// 

bipartisanpolicy.org/download/?file=/wp-content/ 

uploads/2021/01/BPC-ECH_Payment-practices_

RV5.pdf.; Bromer, J., Ragonese-Barnes, M. & Porter, 

T. (2020). Inside family child care networks: 

Supporting quality and sustainability. Chicago, IL: 

Herr Research Center, Erikson Institute. https://

www.erikson.edu/wp-content/uploads/2020/12/ 

Inside-FCC-networks-Case-Studies-2020.pdf. 

71 Datta, A.R., Milesi, C., Srivastava, S., & ZapataGietl, C. (2021). NSECE Chartbook- Home-based 

Early Care and Education Providers in 2012 and 

2019: Counts and Characteristics. OPRE Report No. 

2021–85, Washington, DC: Office of Planning, 

Research, and Evaluation, Administration for 

Children and Families, U.S. Department of Health 

and Human Services. https://www.acf.hhs.gov/ 

opre/report/home-based-early-care-and-educationproviders-2012-and-2019-counts-andcharacteristics. 

Response: We appreciate the 

validation of the importance of this 

policy and have retained the 

requirement for Lead Agencies to use 

some grants or contracts for direct 

services and have made some changes 

based on commenter suggestions 

described below. Grants and contracts 

for direct services can play a critical role 

in increasing parent options for child 

care, particularly in underserved 

geographic areas and for underserved 

populations like infants and toddlers 

and children with disabilities. They 

increase stability for child care 

providers and encourage them to 

participate in the subsidy program. 

Since insufficient child care supply 

greatly limits parents’ choices in child 

care arrangements, requiring some use 

of grants or contracts to help more 

parents find the child care they need. 

Comment: The NPRM proposed to 

require the use of grants and contracts 

at least to provide some child care 

services for infants and toddlers, 

children with disabilities, and children 

who need care during nontraditional 

hours. Some commenters recommended 

requiring Lead Agencies to use grants or 

contracts for additional underserved or 

under-resourced communities and 

populations, and several commenters 

recommended removing the 

requirement to use grants or contracts 

for nontraditional hour care because 

families may use license-exempt homebased care for nontraditional hours 

either because they prefer it or because 

few child care centers and family child 

care providers operate outside of 

traditional business hours. Commenters 

indicated grants or contracts are less 

appropriate for license-exempt homebased child care. 

Response: Based on these comments, 

the final rule adds ‘‘children in 

underserved geographic areas’’ to the 

list of groups required to be served with 

grants or contracts and removes the 

requirement to use grants or contracts 

for nontraditional hour care. Some 

parents prefer informal care by family or 

friends, often in the child’s home, 

during nontraditional hours of care.69

While it is important to address the 

stark supply issues for this type of care, 

commenter feedback and additional 

review of existing State policies leads us 

to believe mechanisms other than grants 

or contracts, such as higher payment 

rates, engaging with home-based child 

care networks, and partnering with 

employers that have employees working 

nontraditional hours, may also be 

effective for increasing the availability 

of care during nontraditional hours. As 

delineated in § 98.16(y), Lead Agencies 

must take action to build availability of 

nontraditional hour care for families 

participating in CCDF. Though the rule 

does not require it, we encourage Lead 

Agencies to consider whether 

contracted slots for extended hour care 

in the morning and evening would be a 

useful strategy for improving parent 

choice in care that meets their needs. 

Comment: Some commenters 

requested clarification as to whether 

each group listed needed to be served 

with grants or contracts or if serving 

only one of the listed groups would 

satisfy the requirement. 

Response: The final rule leaves in 

place the language to require each of 

three identified groups (i.e., children in 

underserved geographic areas, infants 

and toddlers, and children with 

disabilities) be served with grants or 

contracts. The significant supply 

shortages in each of these types of care 

limit parents’ child care options and 

would benefit from grants or contracts. 

Comments: Some commenters wanted 

clarification as to what is meant by 

‘‘some’’ grants or contracts and if ACF 

has a specific threshold in mind, 

stressing the importance of using data to 

determine the number of grants or 

contracts for direct services. Some of 

these commenters thought we should 

set a minimum threshold and others 

recommended against setting a 

minimum or maximum threshold or a 

formula for calculating the appropriate 

percentage of grant or contracts slots. 

Response: ACF declines to set 

thresholds for ‘‘some’’ grants or 

contracts in this rule and encourages 

Lead Agencies to implement the 

provision sufficiently to improve supply 

for these types of care. However, in 

response to comments requesting 

clarification about the number of grants 

or contracts, we revised the language in 

paragraphs § 98.16 (x) and (y) to 

improve transparency around Lead 

Agency policies and require Lead 

Agencies to provide data on the extent 

to which they are serving subsidyeligible children across the identified 

groups. Additionally, ACF revised the 

language in paragraph (y) to clarify that 

Lead Agencies should describe in their 

CCDF Plan what proportion of shortages 

identified in § 98.16(x) would be filled 

with grant or contracted slots. 

Comment: Commenters recommended 

ACF include additional populations of 

children and families to be served by 

grants or contracts while others noted 

new requirement should not shift 

attention from one underserved group to 

another. 

Response: ACF strongly encourages 

Lead Agencies to use grants or contracts 

for additional groups recommended by 

commenters, but declines to require 

Lead Agencies use this strategy to serve 

additional populations. Additional 

groups recommended by commenters 

include children experiencing 

homelessness, children involved with 

the child welfare system (including 

those in foster care and kinship care), 

adolescent parents, out-of-school time 

care/school age, dual language learners, 

2-generation programs, children whose

parents have been incarcerated,

providers in rural or remote

communities, and areas with an

insufficient supply of licensed child

care. ACF further encourages Lead

Agencies use data collected through

supply analysis to direct grants or

contracts towards identified areas of

need.

Comment: Commenters recommended 

that ACF specify Lead Agencies use 

grants or contracts across different child 

care settings, including family child 

care and networks of home-based care 

providers. 

Response: ACF strongly encourages 

Lead Agencies to define and use an 

equity-focused distribution process for 

grants or contracts that includes family 

child care and small child care centers 

to support parents having a range of 

child care options. Many Lead Agencies 

successfully used such a process to 

target and distribute ARP Act 

Stabilization Grant funds. While grants 

or contracts are traditionally seen as a 

strategy for center-based care, some 

Lead Agencies have effective grants or 

contracts with family child care 

providers and home-based provider 

networks.70Additionally, research 

shows that families utilize family child 

care settings for infants and toddlers at 

higher rates than older children.71


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Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 15383 

72RAPID, (2022) ‘‘Overdue: A new child care 

system that supports children, families and 

providers,’’ https://static1.squarespace.com/static/ 

5e7cf2f62c45da32f3c6065e/t/ 

63a1d9582916181ff4b729be/1671551320275/ 

overdue_new_child_care_system_factsheet_

dec2022.pdf. 

Comment: Some commenters wanted 

clarification about the intended 

definition of ‘‘grants and contracts,’’ if 

the requirement was specific to direct 

services, and if best practices for 

contracting and equity could be 

included in a definition. 

Response: We provide clarification on 

the definition of grants or contracts and 

direct services at § 98.50. We agree with 

commenters that grants or contracts for 

direct service slots should at a 

minimum adhere to the same 

requirements as certificates, including 

paying providers prospectively. While 

the final rule does not include 

additional regulatory language to this 

effect, new and existing regulations at 

§ 98.45(m) apply to both grant or 

contracted slots and certificates, and 

therefore reaffirms these expectations. 

In addition, we strongly encourage Lead 

Agencies to design their grants or 

contracts with best practices in mind. 

Specifically, we strongly encourage 

Lead Agencies to pay a rate based on 

cost of care, offer higher rates for grant 

or contracted slots, and provide 

opportunities for additional technical 

assistance, coaching, mentoring, and 

other supports to child care programs. 

Comment: A few commenters, 

including one member of Congress, 

opposed this requirement and expressed 

concerns that any requirement for grants 

or contracted slots reduced parent 

choice, specifically because faith-based 

providers may not be able to receive 

grants or contracts. 

Response: ACF disagrees with the 

contention that requiring grants or 

contracts for populations that the statute 

itself requires Lead Agencies to 

prioritize would reduce parent choice. 

Section 658E(c)(2)(M) of the Act clearly 

states that direct contracts or grants are 

a strategy to increase the supply and 

quality of child care for underserved 

populations, including infants and 

toddlers, children with disabilities, and 

children who need child care during 

nontraditional hours. Some parents do 

not have meaningful choice currently,72

and integrating some grants and 

contracts into direct service options will 

expand parents’ choices. Nothing in 

federal law prohibits faith-based child 

care providers from receiving grants or 

contracts to provide direct child care 

services. Faith-based providers 

receiving grants or contracts are 

restricted from using the funds for 

sectarian purposes or activities, 

including sectarian worship or 

instruction (42 U.S.C. 9858k(a). Further, 

because families must still be offered 

the option of a certificate or voucher, 

this rule will not limit a family’s ability 

to choose a faith-based provider and we 

do not expect the requirement to 

materially reduce the amount of funding 

available to faith-based child care 

providers through certificates or 

vouchers. 

Comment: Some commenters 

suggested ACF allow Lead Agencies to 

opt-out of the requirement for grants or 

contracts if they could demonstrate 

there was no need or desire for grants 

or contracts. 

Response: For the reasons listed 

above, including limitations in parents’ 

choice in child care arrangements for 

some parents participating in CCDF, 

significant supply shortages, and 

research demonstrating the benefits of 

grants or contracts on supply and for 

providers, we decline to accept this 

recommendation. 

§ 98.33 Consumer and Provider 

Education 

Clarifying full monitoring reports and 

aggregate data. This final rule adds 

§ 98.33(a)(4)(ii) to clarify what 

information Lead Agencies must post on 

consumer education websites. Section 

658E(c)(2)(D) of the Act (42 U.S.C. 

9858c(c)(2)(D)) requires monitoring and 

inspection reports of child care 

providers be made available 

electronically to the public. Previous 

regulations at § 98.33(a)(4) require Lead 

Agencies to post ‘‘full monitoring and 

inspection reports, either in plain 

language or with a plain language 

summary,’’ but the regulation did not 

define a ‘‘full monitoring and inspection 

report.’’ This lack of clarity has led to 

varied implementation, with many Lead 

Agencies only posting violations. While 

it is critical for parents to be aware of 

how a provider did not meet a health 

and safety requirement, it is also useful 

for parents to understand the full scope 

of a monitoring inspection, so they have 

the information needed to make 

informed child care decisions. Section 

98.33(a)(4)(ii) through (iv) are 

redesignated accordingly without 

changes. 

The final rule also amends paragraph 

(a)(5) to require the CCDF consumer 

education websites include the total 

number of children in care each year 

disaggregated by the type of child care 

provider because it provides necessary 

context for parents and the public to 

understand the aggregate data on serious 

injuries and fatalities in child care 

settings. § 98.33(a)(5) requires Lead 

Agencies to post the annual aggregate 

number of deaths and serious injuries 

by provider type and licensing status 

and instances of substantiated child 

abuse that occurred in child care 

settings each year, for eligible child care 

providers, on the State or Territories 

child care website. Lead Agencies are 

required to post the total number of 

children in care by provider category 

and licensing status. However, the 

requirement to include the total number 

of children in care by provider category 

and licensing status was only included 

in the preamble to the 2016 CCDF final 

rule and not the regulatory language 

itself (81 FR 67477). This omission has 

led to confusion and unclear 

expectations for Lead Agency 

compliance. We also separate the 

existing requirements in paragraph 

(a)(5) without change into multiple 

subprovisions to improve clarity. 

Comment: Commenters supported the 

proposed clarification to the definition 

of ‘‘full monitoring and inspection 

report’’ at § 98.33(a)(4)(ii). 

Response: We received no other 

comments on § 98.33(a)(4)(ii) and have 

retained the language as proposed in the 

NPRM. 

Comment: Commenters supported the 

requirement for States to post the total 

number of children in care to their 

consumer education websites. Several 

commenters proposed that States be 

required to post the number of children 

in care by child age, licensing status, 

and quality rating, noting these data are 

needed to understand the supply of care 

available to families. 

Response: Though we agree this 

disaggregated data would provide useful 

information about child care supply and 

could help parent decision-making, we 

understand some States may not have 

the capacity to publish this information. 

Therefore, we retained the language as 

proposed to ensure this new 

requirement does not add additional 

burden to States. 

Comment: A few Lead Agencies 

commented that posting the total 

number of children in care would be 

burdensome for States. These 

commenters had concerns about how 

often Lead Agencies would be expected 

to collect this data and from which 

types of providers they would need to 

collect these counts. Additionally, 

commenters noted that collecting this 

data could necessitate changes to State 

computer tracking systems. 

Response: States are already required 

to post this data under CCDF and ACF 

has created multiple technical resources 

to help States publish these counts on 


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15384 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 

73Child Care State Capacity Building Center. 

(September 29, 2023). Consumer Education website 

Requirements Infographic. U.S. Department of 

Health and Human Services, Administration for 

Children and Families. Office of Child Care. https:// 

childcareta.acf.hhs.gov/sites/default/files/new-occ/ 

resource/files/consumer_education_website_

requirements.pdf.; Child Care State Capacity 

Building Center. (August 2021). Template for 

Displaying Serious Injuries, Deaths, and Instances 

of Substantiated Child Abuse in Child Care. U.S. 

Department of Health and Human Services, 

Administration for Children and Families, Office of 

Child Care. https://childcareta.acf.hhs.gov/sites/ 

default/files/new-occ/resource/files/aggregate_

data_template_for_posting_serious_injuries.pdf. 

their websites.73 Lead Agencies already 

must post the total number of children 

in care by provider category and 

licensing status on their consumer 

education websites and the language 

changes at § 98.33(a)(5) only clarify that 

these data, along with the counts of 

deaths or serious injuries, are posted 

annually for all eligible providers. For 

licensed care, States and Territories can 

provide an estimated number of 

children in care based on the capacity 

of licensed program, rather than actual 

enrollment or attendance numbers. ACF 

will continue to offer flexibilities if 

States do not have a way to estimate the 

number of children in license-exempt 

care. The language was retained as 

proposed. 

Posting sliding fees scales. To help 

ensure families are aware of co-payment 

policies, the final rule retains a new 

requirement at § 98.33(a)(8) that States 

and Territories post information about 

their co-payment sliding fee scales. 

Section 658E(c)(2)(E) of the Act (42 

U.S.C. 9858c(c)(2)(E)) requires Lead 

Agencies to collect and disseminate 

consumer education information that 

will promote informed child care 

choices for parents of eligible children, 

the public, and providers. Consumer 

education is a crucial part of parental 

choice because it helps parents better 

understand their child care options and 

incentivizes providers to improve the 

quality of their services. Since Congress 

expanded the Act’s focus on consumer 

education in 2014, all States and 

Territories have launched consumer 

education websites providing parents 

and the general public with critical 

information about child care in their 

community and improving transparency 

around the use of federal child care 

funds. However, many of these websites 

still overlook key areas that impact 

family decisions about child care and 

applying for child care subsidies. For 

example, it remains difficult for parents 

in many communities to learn about copayment rates in the subsidy program 

and what their family might expect to 

pay. Therefore, the final rule requires 

Lead Agencies to post current 

information about their system of costsharing (co-payments) based on family 

size and income. Under this new 

requirement, Lead Agencies are required 

to post about their sliding fee scale for 

parent co-payments, including policies 

related to waiving co-payments and 

estimated co-payment amounts for 

families at § 98.33(a)(8). 

Comment: Commenters recognized 

and supported the need for the 

proposed consumer education 

requirement at § 98.33(a)(8). In general, 

they expressed that requiring Lead 

Agencies to post clear information about 

their co-payment policies improves 

access to information that is useful for 

families making decisions about child 

care. 

In response to our request for 

comments on the type of information 

related to co-payments that should be 

included on consumer education 

websites, the majority of commenters on 

this proposal stated that consumer 

education websites should explain how 

co-payments are calculated and how copayments might differ based on the type 

of provider a family chooses. Other 

commenters proposed that websites 

should include information about 

weekly or monthly amounts that 

families might pay, as well as details 

about co-payments when enrolling 

multiple children, changing a copayment amount, and populations for 

which co-payments are waived entirely. 

Response: This new provision at 

§ 98.33(a)(8) clarifies that consumer 

education websites must help families 

determine the co-payment amount that 

they can expect to pay. We agree that it 

may be valuable for parents to see this 

information broken into weekly and/or 

monthly amounts, and States have the 

flexibility to use this approach. It may 

also be helpful for consumer education 

websites to include details about how 

co-payment amounts are impacted when 

multiple children are enrolled and 

outline the State-specific process for 

requesting a change to a co-payment 

amount. We appreciate these 

recommendations and reiterate that 

Lead Agencies have flexibility to inform 

parents about what they should expect 

to pay in the way that best makes sense 

within the context of their policies and 

processes. The final rule clarified with 

the added requirement at § 98.33(a)(8) 

that State websites must provide 

information about waiving co-payments, 

and we agree with commenters that 

posted information about populations 

for which co-payments are waived (e.g., 

incomes are at or below 150 percent of 

the poverty level, children with 

disabilities) is necessary to meet this 

requirement. 

Comment: We requested comments 

specifically on the type of information 

related to eligibility that should be 

included on the consumer education 

websites. One commenter recommended 

that additional eligibility information 

should be included on websites, 

specifically information about the hours 

required for full-time care and about the 

education and/or work requirements for 

parents participating in CCDF. 

We also received recommendations 

for consumer education websites that 

were unrelated to co-payment or 

eligibility policies. Several commenters 

suggested that websites should provide 

information about child care waitlists, 

license-exempt care, Head Start 

eligibility, program contact information, 

and the language proficiency of child 

care staff. 

Response: We appreciate the 

consumer education proposals related to 

eligibility and agree that posting about 

the hours required for full-time care and 

about the education and/or work 

requirements for CCDF are examples of 

best practices. To ensure that Lead 

Agencies continue to have flexibility, 

we opted not to make any regulatory 

changes to the consumer education 

section related to eligibility. 

Comment: Some commenters 

recommended co-payment information 

posted as part of the new requirement 

at § 98.33(a)(8) be available to families 

in multiple languages. Several 

commenters recommended we require 

Lead Agencies post sliding fee scale 

information in multiple languages or for 

websites to have a translation option. 

Some commenters also suggested that 

consumer education websites should 

include co-payment calculators. 

Response: The regulation already 

requires at § 98.33(a) that consumer 

education websites are ‘‘easily 

accessible websites that ensures the 

widest possible access to services for 

families who speak languages other than 

English and persons with disabilities.’’ 

Therefore, the information posted on the 

website, including the information 

about sliding fee scales, must be easily 

accessible and ensure the widest 

possible access to services for families 

who speak languages other than English. 

We agree that online co-payment 

calculators can be a helpful tool for 

families to access child care 

information, and we encourage Lead 

Agencies to follow the example of the 

States that have already implemented 

these tools on their websites. However, 

we declined to add a regulatory 

requirement for States to add copayment calculators, as to maintain 

flexibility for States. 


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Comment: Commenters also suggested 

other information dissemination 

strategies in addition to the new website 

requirement at § 98.33(a)(8). Several 

commenters suggested we require States 

provide families a copy of the sliding 

fee scale that includes a plain-language 

explanation of how co-payments are 

calculated in their home language. Some 

commenters wanted Lead Agencies to 

require providers post the sliding fee 

scale prominently in child care 

facilities. They also supported the effort 

to expand information dissemination 

strategies but wanted to go further and 

encourage States to adopt additional 

forms of communication (e.g., 

pamphlets at community-based spaces) 

and to utilize search engine 

optimization. Commenters focused on 

increasing access to people with low 

literacy and encouraged the adoption of 

mobile-friendly information as much as 

possible. 

Response: We appreciated 

commenters providing additional 

suggestions for information 

dissemination strategies. While we 

opted not to add additional 

requirements to provide copies of the 

sliding fee scale to families, to post 

sliding fee scale information in child 

care facilities, to utilize search engine 

optimization, or to adopt additional 

forms of communication beyond 

websites, we encourage all Lead 

Agencies to utilize various 

communication methods to reach 

families with low-literacy or without 

access to computers. We encourage 

states to create websites that are mobilefriendly. It is essential for child care 

information to be accessible to all 

families, and we recognize that no 

single information dissemination 

strategy will work for all Lead Agencies. 

Subpart E—Program Operations (Child 

Care Services) Lead Agency and 

Provider Requirements 

Subpart E of the regulations describes 

Lead Agency and provider requirements 

related to applicable health and safety 

requirements, monitoring and 

inspections, and criminal background 

checks. It also includes provisions 

requiring the Lead Agency to set 

payment rates for providers serving 

children receiving subsidies that ensure 

equal access to the child care market 

and to establish a sliding fee scale that 

provides for affordable cost-sharing for 

families receiving child care assistance. 

This final rule includes changes to 

this subpart related to family copayments and Lead Agency payment 

rates and practices to providers, as well 

as technical changes to criminal 

background checks. 

§ 98.43 Criminal Background Checks 

Section 658H(b) of the Act (42 U.S.C. 

9858f(b)) and § 98.43(b) require a child 

care staff member to complete a 

comprehensive background check to be 

eligible for employment by a child care 

provider that is licensed, regulated, or 

registered or eligible to participate in 

CCDF. The comprehensive check must 

include a Federal Bureau of 

Investigation (FBI) fingerprint check, a 

search of the National Crime 

Information Center’s National Sex 

Offender Registry (NCIC NSOR), a 

fingerprint-based search of the state 

criminal registry, a search of the state 

sex offender registry, and a search of the 

state-based child abuse and neglect 

registry in the state where the child care 

staff member resides and each state 

where such staff member resided during 

the preceding 5 years. 

Section § 98.43(d)(4) allows 

prospective child care staff to begin 

working for a child care provider after 

receiving results from either the FBI 

fingerprint check or a fingerprint check 

of the state criminal registry or 

repository in the state where the staff 

member resides. Staff members that are 

hired before all background check 

components required at § 98.43(b) are 

completed must be supervised at all 

times by an individual who has already 

received qualifying results. This process 

is often referred to as ‘‘provisional 

employment.’’ The intent in establishing 

the provisional employment 

requirement in the 2016 Final Rule was 

to help staff begin work quickly while 

ensuring child safety by prohibiting 

prospective staff who have not 

completed the FBI or the fingerprint instate criminal background checks from 

working directly with children. 

Since its inclusion in the 2016 CCDF 

Final Rule, States, Territories, Tribes, 

and child care providers have expressed 

concerns with the background check 

requirements, including those related to 

the provisional employment 

requirement, stating that they cause 

hiring delays and exacerbate staffing 

challenges. Many states continue to be 

out of compliance with one or more of 

the background check requirements, 

including provisional hiring. 

While we acknowledge the 

operational challenges associated with 

the Act’s background check provisions, 

the vast majority of the requirements are 

established in the Act and cannot be 

changed through regulations. This final 

rule makes a few technical changes to 

sections of the regulation that were 

previously unclear. 

Responsibility for eligibility 

determination. This final rule makes a 

technical change at § 98.43(a)(1)(i) to 

clarify that States, Territories, and 

Tribes must have requirements, policies, 

and procedures that require the entity to 

make a determination of eligibility for 

child care staff based on the background 

check and cannot simply provide results 

to the child care provider to make the 

determination. This is consistent with 

the statutory requirement at section 

658H(e)(2)(A) (42 U.S.C. 9858f(e)(2)(A)) 

that ‘‘[t]he State shall provide the results 

of the criminal background check to the 

provider in a statement that indicates 

whether a child care staff member 

(including a prospective child care staff 

member) is eligible or ineligible for 

employment described in subsection (c), 

without revealing any disqualifying 

crime or other related information 

regarding the individual.’’ Previously 

there has been some confusion as to 

whether the Lead Agency should simply 

give the results to child care providers 

to then make the determination. 

Relatedly, the final rule amends 

§ 98.43(c)(1) to clarify that it is the State, 

Territory, Tribe, and Lead Agency’s 

responsibility to determine a 

prospective staff member’s eligibility for 

employment as a result of the 

background check requirements and 

that a child care provider does not have 

a role in reviewing background check 

results and determining a staff member’s 

employment eligibility. This does not 

preclude child care providers from 

using additional discretion for hiring 

after the State, Territory, or Tribe’s 

determination of eligibility based on the 

comprehensive background check. 

Comment: Commenters supported 

these proposed clarifications. Some 

expressed concerns that the change at 

§ 98.43(a)(1)(i) when combined with the 

proposed change related to qualifying 

results at § 98.43(d)(3)(i) would change 

policies related to provisional 

employment. 

Response: As discussed in more detail 

below, we are not making any 

substantive changes to requirements 

related to provisional hiring. Rather, 

this change is meant to clarify that 

States, Territories, and Tribes must have 

processes related to determining a staff 

member’s eligibility. Previous regulatory 

language did not include that 

requirement and led to confusion about 

who was responsible for determining 

eligibility. Therefore, we kept the 

change as proposed. 

Comment: One commenter requested 

clarification on whether this provision 

would impact existing State hiring 

practices, especially those that allow 

child care providers to make a final 

hiring decision after the State has made 


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74U.S. Equal Employment Opportunity 

Commission, Enforcement Guidance on the 

Consideration of Arrest and Conviction Records in 

Employment Decisions under Title VII of the Civil 

Rights Act of 1964, https://www.eeoc.gov/laws/ 

guidance/upload. 

an employment eligibility determination 

based on State and federal regulations. 

Response: Our intention is to clarify 

the role of the State, Territory, Tribe, 

and Lead Agency as it relates to making 

determinations of employment 

eligibility. Previous regulatory language 

made it unclear whether child care 

providers could make determinations of 

eligibility, and Lead Agencies had 

varying interpretations of this 

requirement. In response to comments, 

we revised the proposed change to also 

remove reference to child care providers 

in the introductory language at 

§ 98.43(c)(1) to reinforce that child care 

providers do not have a role in the 

employment eligibility determination 

process. 

State, Territory, and Tribal regulations 

and procedures may allow a child care 

provider to establish its own criteria for 

unsuitability even after the State, 

Territory, or Tribe determines that the 

individual is eligible for employment 

based on CCDF regulations and State 

Code. This means that it is possible for 

a child care provider to decide not to 

hire an individual, even when that 

individual has been deemed eligible for 

employment by the state, territory, or 

Tribe. However, as mentioned in the 

2016 Final Rule Preamble, we continue 

to strongly encourage States, Territories, 

and Tribes and child care providers to 

ensure that hiring practices meet the 

recommendations of the U.S. Equal 

Employment Opportunity Commission 

for any additional disqualifying 

crimes.74

Disqualifying Crimes. Section 658H(c) 

of the Act (42 U.S.C. 9858f(c)) and 

§ 98.43(c)(1) of the regulations specify 

disqualifying crimes for child care staff 

members of providers serving children 

receiving CCDF assistance. The 

disqualification at § 98.43(c)(1)(v) is for 

a conviction of a violent misdemeanor 

as an adult against a child, including a 

misdemeanor involving child 

pornography. There has been some 

confusion as to whether a misdemeanor 

involving child pornography needed to 

be classified as violent or non-violent to 

be a considered a background check 

disqualifier. To address these questions, 

the final rule amends § 98.43(c)(1)(v) to 

classify any misdemeanor involving 

child pornography as a disqualifier 

under CCDF, regardless of whether the 

crime is classified as violent or nonviolent. 

Comment: Commenters requested 

additional clarification about which 

misdemeanors involving child 

pornography must be considered 

disqualifying offenses under CCDF. 

Response: To address comments, we 

revised the proposed change at 

§ 98.43(c)(1)(v) to further clarify that any 

misdemeanor conviction involving 

child pornography must be considered a 

disqualifying crime whether considered 

violent or not. 

Comments: One commenter requested 

we define the term ‘‘violent.’’ 

Response: We decline to define the 

term ‘‘violent’’ in the regulation. Section 

658H(c) of the Act separately defines 

felonies involving child pornography as 

being a disqualifying ‘‘crime against 

children’’ (42 U.S.C. 9858f(c)(1)(D)(iii) 

and (E)). Felonies are listed at 

subparagraph (D) and misdemeanors are 

listed at subparagraph (E). Lead 

Agencies should define ‘‘violent’’ in 

accordance with their own State, 

Territory, or Tribal law. 

Receiving Qualifying Results. Section 

658H(d) of the Act (42 U.S.C. 9858f(d)) 

and § 98.43(d) of the regulations require 

child care providers to submit requests 

for background checks prior to when an 

individual becomes a staff member and 

at least once every five years. 

§ 98.43(d)(3)(i) makes an exception if a 

staff member already received a 

background check within the past five 

years. The final rule amends 

§ 98.43(d)(3)(i) to clarify those results 

must be qualifying results. This is 

consistent with how OCC has supported 

and overseen this provision since 2016. 

In response to comments, the final 

rule also clarifies at § 98.43(d)(4) that a 

prospective staff member may begin 

working with children only after they 

receive qualifying results for either the 

FBI fingerprint check or the in-state 

fingerprint check (as long as their work 

with children is supervised by a staff 

member whose background check is 

complete). Simply submitting the 

fingerprint for the FBI check or the instate check is not sufficient for a 

prospective staff member to be 

provisionally employed to work with 

children. This is consistent with how 

OCC has enforced and provided 

guidance for the provisional hire 

requirement since 2016, but the 

underlying regulation wording has 

caused some confusion. In both these 

instances, submitting background 

checks is insufficient for working with 

children because it is necessary to first 

receive qualifying results. 

Comment: Commenters were 

generally supportive of the clarification 

in § 98.43(d)(3)(i), but some raised 

concerns about whether this technical 

change would impact the existing 

provisional hire flexibility at 

§ 98.43(d)(4), which commenters noted 

was a critical flexibility. 

Response: In this final rule, the 

provisional hire flexibility remains 

unchanged from the 2016 Final Rule: 

States, Territories, and Tribes may 

permit child care providers to 

provisionally hire individuals for whom 

there are qualifying results on either the 

FBI fingerprint check or the in-state 

fingerprint check as long as their work 

with children is supervised by a staff 

member whose background check is 

complete. We amended § 98.43(d)(4) for 

clarity in response to comments and 

make no substantive changes to the 

provisional hire rule. 

§ 98.45 Equal Access 

Demonstrating Equal Access. Section 

98.45(b) requires Lead Agencies to 

summarize in their CCDF Plans the data 

and evidence relied on to ensure that 

families participating in CCDF have 

equal access to child care services 

comparable to those provided to 

families not eligible to receive child care 

assistance. The final rule amends (b)(5) 

to require Lead Agencies describe how 

co-payments ‘‘do not exceed 7 percent 

of income for all families.’’ This change 

aligns with the new requirement at 

redesignated § 98.45(l)(3) to limit family 

co-payments to 7 percent of family 

income. Fuller discussion of this 

change, including comments and 

responses, are later in this preamble at 

§ 98.45(l). 

Market Rate Survey Reports. This 

final rule requires at new 

§ 98.45(f)(1)(iv) that States and 

Territories include data on the extent to 

which CCDF child care providers charge 

amounts to families more than the 

required family co-payment in instances 

where the provider’s price exceeds the 

subsidy payment, including data on the 

size and frequency of any such amounts. 

States and Territories have the 

discretion to determine how they 

present this data in their reports. As 

States and Territories have already been 

required to examine this data as part of 

their market rate survey or approved 

alternative methodology, we do not 

expect this requirement to create new 

burdens for the Lead Agencies. 

This requirement was not proposed in 

the NPRM but is being added in this 

final rule in response to comments 

noting that the new requirement 

capping family co-payments made it 

more important to have transparent and 

timely data about the true out of pocket 

costs for families receiving subsidies. 

The comments received are discussed at 

§ 98.71. 


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Paying the Established Subsidy Rate. 

This final rule codifies at § 98.45(g) 

existing policy that allows Lead 

Agencies to pay eligible child care 

providers caring for children receiving 

CCDF subsidies the Lead Agency’s 

established subsidy payment rate to 

account for the actual cost of care, even 

if that amount is greater than the price 

the provider charges parents who do not 

receive subsidy. The preamble to the 

2016 CCDF Final Rule states that Lead 

Agencies may pay amounts above the 

provider’s private pay rate if they are 

designed to pay providers for additional 

costs associated with offering higherquality care or types of care that are not 

produced in sufficient amounts by the 

market. (81 FR 67514). However, this 

language was not included in the 

regulation, which has led to 

misunderstanding in the field and led 

some Lead Agencies to prohibit paying 

child care providers the full established 

payment rate. 

Section 658E(c)(4) of the Act (42 

U.S.C. 9858c(c)(4) and § 98.45 require 

Lead Agencies to set child care provider 

payment rates based on findings from a 

market rate survey or an approved 

alternative methodology to ensure 

children eligible for subsidies have 

equal access to child care services 

comparable to children whose parents 

are not eligible to receive child care 

assistance because their family income 

exceeds the eligibility limit. Lead 

Agencies must also complete a narrow 

cost analysis, regardless of whether they 

used a market rate survey or approved 

alternative methodology to set rates. A 

market rate survey is the collection and 

analysis of prices and fees charged by 

child care providers for services in the 

priced market, and a narrow cost 

analysis estimates the true cost of care, 

not just price. Lead Agencies must 

analyze price and cost data together to 

determine adequate child care provider 

subsidy rates to meet health, safety, and 

staffing requirements and meeting these 

standards relies on child care providers 

receiving the full established payment 

rate. ACF strongly encourages Lead 

Agencies to set payment rates high 

enough so that child care providers can 

retain a skilled workforce and deliver 

higher-quality care to children receiving 

subsidies and the policies can achieve 

the equal access standard required by 

law. The preamble to the 2016 CCDF 

final rule restated the importance of 

setting higher payment rates and 

recommended the 75th percentile as a 

benchmark to gauge equal access for 

Lead Agencies, stating ‘‘Established as a 

benchmark for CCDF by the preamble to 

the 1998 Final Rule (63 FR 39959), Lead 

Agencies and other stakeholders are 

familiar with [the 75th percentile] as a 

proxy for equal access.’’ (81 FR 67512) 

ACF has prioritized the importance of 

setting higher payment rates and in 

April 2023 determined that any 

payment rates set at less than the 50th 

percentile were insufficient to meet the 

equal access requirements of CCDF. 

ACF noted that the 50th percentile is 

not an equal access benchmark, nor is 

it a long-term solution to gauge equal 

access, and thus may not be considered 

sufficient for compliance in future 

cycles. But the value of setting higher 

payment rates is undermined if a Lead 

Agency does not pay the full established 

rate. Though allowable under CCDF, it 

undermines parent choice and likely 

limits the number of participating 

children in higher quality care. 

Paying all CCDF providers at the Lead 

Agency-established rate is a key 

payment practice that reflects the actual 

cost of child care, fosters parent choice, 

increases child care quality, and 

supports better child care supply. This 

is existing policy under CCDF but 

because of its importance to achieving 

the main purposes of the Act, this Final 

Rule codifies the policy in the 

regulatory language to reduce confusion. 

Comment: Comments on this proposal 

were overwhelmingly positive in 

support of the codification and 

clarification on paying the established 

rate, although a few commenters offered 

suggestions for implementation support 

or some reasons for caution. 

Commenters stated that paying the full 

established payment rate will increase 

provider stability, encourage provider 

participation in the subsidy program, 

and encourage Lead Agencies to pursue 

cost-based alternative methodologies 

and set payment rates closer to the true 

cost of care. Several commenters 

supported our assessment that paying 

the full established rate will help 

address inequities that arise when 

providers in low-income communities 

cannot raise fees because families who 

do not receive CCDF are not able to pay 

more for child care. Additionally, 

several comments noted that paying the 

established rate will also benefit 

middle-income families who are not 

eligible for CCDF because program 

income would increase without passing 

costs to parents. Moreover, commenters 

provided evidence from States that pay 

the full rate, including showing that in 

one State following the repeal of the law 

prohibiting payment above the private 

rate in 2019 improved access to quality 

child care, reduced bureaucratic 

requirements for the state, and removed 

one incentive for providers to raise rates 

for private pay families. 

Response: We appreciate commenters’ 

strong support for this critical policy 

clarification, especially related to the 

role it can play in addressing inequities 

in the child care system and its benefit 

to families that do not receive subsidies 

and have not made changes to the 

proposed language. While the 2016 

CCDF Final Rule stated in the preamble 

that Lead Agencies had the ability to 

pay child care providers above their 

established private-pay tuition, it is 

clear from comments that this 

clarification in the rule is necessary to 

ensure Lead Agencies are aware of this 

option and encouraged to implement 

this practice. 

Comment: A few commenters 

requested ACF articulate clearly that 

paying the established rate is 

encouraged, but not required. In 

addition, one commenter noted that 

obtaining legislative approval to pay the 

established rate could be challenging for 

Lead Agencies in States that prohibit 

this practice. On the other hand, a few 

commenters recommended ACF require 

Lead Agencies to pay child care 

providers the full rate established rate. 

Response: ACF reiterates this policy is 

encouraged but not required and 

acknowledges States will have different 

internal processes should they decide to 

newly implement this policy. 

Comment: Additionally, commenters 

emphasized paying the established rate 

for children receiving subsidy does not 

address the funding limitations faced by 

child care providers who serve families 

with different levels of income. 

Response: ACF acknowledges this 

provision does not fully address the 

broader issues about the funding and 

stability of the child care system. 

Capping Family Co-payments. Section 

658E(c)(5) of the Act (42 U.S.C. 

9858c(c)(5)) establishes that Lead 

Agencies cost-sharing and sliding fee 

policies cannot be a ‘‘barrier to families 

receiving assistance.’’ This final rule 

clarifies at §§ 98.45(b)(5) and 98.45(l)(3) 

as redesignated that co-payments cannot 

exceed 7 percent of a family’s income 

because ACF considers co-payments 

above that rate to be an impermissible 

barrier to a family receiving assistance 

and therefore not permissible under 

CCDF. If a family receives CCDF for 

multiple children, their total copayment amount also could not exceed 

7 percent of the family’s income. We 

anticipate these changes will lower 

child care costs for many families, 

reduce a barrier to child care access, and 

improve family well-being and 

economic stability. 

The preamble (81 FR 67515) of the 

2016 CCDF Final Rule established 7 

percent as the federal benchmark for an 


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75https://www.whitehouse.gov/cea/writtenmaterials/2023/07/18/improving-accessaffordability-and-quality-in-the-early-care-andeducation-ece-market/. 

76Adams, G., & Pratt, E. ‘‘Assessing child care 

subsidies through an equity lens.’’ (2021). Urban 

Institute. 

77Slideshow summarizing study findings 

retrieved from https://www.groundworkohio.org/_

files/ugd/d114b9_956a4a95f16d44819696f1594

fe98ce0.pptx?dn=POS_Groundwork%20Ohio%20

Presentation%20Deck_Final.pptx. 

78 Ibid. 

79 2021 Statewide Community Needs Assessment, 

Maine Community Action Partnership, December 

2021. Retrieved from https://mecap.org/wp-content/ 

uploads/2022/01/MeCAP-Statewide-CommunityNeeds-Assessment-Report-with-Appendices-FINAL12032021-2.pdf. 

80Portland Regional Chamber of Commerce, 

December 2021. Retrieved from https://legislature.

maine.gov/testimony/resources/ 

AFA20220303Dundon132906387075472062.pdf. 

81Ferguson, S. & Lucy, I. ‘‘Data Deep Dive: A 

Decline of Women in the Workforce.’’ U.S. Chamber 

of Commerce, April 27, 2022. Retrieved from 

https://www.uschamber.com/workforce/data-deepdive-a-decline-of-women-in-the-workforce. 

82National Academies of Sciences, Engineering, 

and Medicine. (2018). Transforming the Financing 

of Early Care and Education. Washington, DC: The 

National Academies Press. https://doi.org/ 

10.17226/24984. 

affordable co-payment for families 

receiving CCDF but did not make it a 

mandatory ceiling. According to federal 

fiscal year (FFY) 2022–2024 CCDF State 

and Territory Plans, 15 Lead Agencies 

have set all their co-payments to 7 

percent or less. Among the rest of Lead 

Agencies, co-payments rise as high as 27 

percent of family income. In limiting 

family co-payments to no more than 7 

percent of household income, the child 

care costs for families with low incomes 

will better align with cost burdens for 

higher income families. Families with 

lower incomes pay a higher portion of 

income for child care than those with 

higher incomes. For example, the 

President’s Council of Economic 

Advisers found that households with 

annual incomes below $25,000 pay 

between 9 and 31 percent of their 

income for child care, while households 

with annual incomes above $150,000 

pay between 6 and 8 percent of their 

annual income for child care.75

In response to comments, the final 

rule includes a clarification at newly 

designated § 98.45(n)(5) to require Lead 

Agencies to demonstrate in their CCDF 

Plan that the total payment to a provider 

(subsidy payment amount and family 

co-payment) is not impacted by costsharing policies. Lead Agencies must 

continue to set payment rates at levels 

that provide equal access to care for 

families receiving child care subsidies, 

and ACF expects to closely monitor 

Lead Agency payment rates to ensure 

reductions in family co-payments 

transfer the cost to Lead Agencies and 

not providers. 

Comment: Most commenters on this 

proposal supported the 7 percent limit, 

with many comments validating that 

child care co-payments can act as a 

barrier to child care access. 

Commenters, including a bicameral 

letter from members of Congress, 

reaffirmed the need to require the 7 

percent cap to meet statutory equal 

access requirements rather than 

continuing to defer to Lead Agency 

discretion. 

In general, many commenters 

acknowledged the negative 

consequences high co-payments can 

pose for CCDF families and providers, 

citing research that the cost of child care 

is a barrier to access at any co-payment 

level.76 One commenter shared how 

they have witnessed how waived copayments under COVID–19 

supplemental funds benefited families, 

including helping them cover other bills 

and pay off debt. Other commenters 

acknowledged the importance of 

supporting affordable co-payments for 

families, and the importance of 

removing barriers that undermine 

parental choice. 

Some commenters provided data on 

the negative economic impact that the 

lack of affordable child care poses for 

their State and the country. According 

to a 2023 statewide survey of 800 

registered voters in Ohio, 70 percent of 

nonworking or part-time working 

mothers indicated that they would 

reenter the workforce or work more 

hours if they had access to affordable 

child care.77 The same survey found 83 

percent of Ohio small business owners 

citing child care as a barrier to hiring.78

Similar concerns regarding child care 

affordability were found in Maine from 

a 2021 Statewide Community Needs 

Assessment conducted by the Maine 

Community Action Partnership,79 and 

multiple Portland Regional Chamber of 

Commerce member surveys showed that 

lack of child care was a significant 

barrier to hiring, training, and retaining 

employees for small and large 

employers throughout the State.80

Speaking to national trends, another 

comment highlighted data from the U.S. 

Chamber of Commerce showing that 

half of all workers and nearly 60 percent 

of parents cite lack of child care as their 

reason for leaving the workforce, and 

research shows that once women leave 

the workforce, it is challenging for them 

to return.81

Response: We have retained the 

prohibition on Lead Agencies setting copayments above 7 percent of family 

income because such co-payments 

would be a barrier to child care access 

for families and appreciate commenters’ 

support. 

Comment: In the NPRM, we requested 

comment on whether 7 percent is the 

correct threshold for determining a 

barrier to child care access, including 

data on child care affordability. Some 

organizations noted that 7 percent of 

family income would not be affordable 

for many families and recommended a 

lower cap, while others supported the 7 

percent proposal but preferred we set a 

lower cap. Commenters also noted that 

some States have already taken steps to 

significantly limit family co-payments, 

including one State that plans to 

implement a policy that would cap copayments to a lower standard of 1 

percent of a family’s income. We also 

received a small number of comments 

questioning whether 7 percent is the 

correct benchmark for affordability and 

recommending further study of 

affordability, and/or funding a 

commission of experts or creating an 

advisory board with parents and 

providers before establishing the 

requirement. Others supported the 

requirement to limit co-payments but 

recommended that we continue to 

conduct research on an appropriate 

affordability threshold to update the cap 

in the future. 

Response: We retain the 7 percent cap 

in this final rule because we believe 

amounts above this threshold pose a 

barrier to child care access in the CCDF 

program. We further note that 7 percent 

of family income is not affordable for 

many families participating in CCDF 

and encourage Lead Agencies to adopt 

lower co-payment caps and minimize or 

waive co-payments for more families. 

As discussed above, families with low 

incomes on average pay 31 percent of 

their incomes for child care, while 

families with higher incomes pay 

between 6 and 8 percent. As CCDF 

assistance is intended to offset the 

disproportionate share of income that 

families with low incomes pay for child 

care, families participating in CCDF 

should not be required to pay a greater 

share of their income than higher 

income families. 

Finally, we agree that supporting 

research to better understand child care 

cost burden and affordability for 

families is important. The National 

Academies of Sciences, Engineering, 

and Medicine published a consensus 

report in 2018 that included discussion 

of affordability for families that detailed 

the inherent complexity in defining 

what is affordable for families.82 The 

ACF Office of Planning, Research, and 

Evaluation supports ongoing research 

on child care affordability. However, the 


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83Lee, Won Fy, Aaron Sojourner, Elizabeth E. 

Davis, and Jonathan Borowsky. 2024. ‘‘Effects of 

Child Care Vouchers on Price, Quantity, and 

Provider Turnover in Private Care Markets.’’ 

Upjohn Institute Working Paper 24–394. 

Kalamazoo, MI: W.E. Upjohn Institute for 

Employment Research. https://doi.org/10.17848/ 

wp24–394. 

84Council of Economic Advisors (CEA) analysis 

of the 2019 National Survey of Early Care and 

Education (NSECE). https://www.whitehouse.gov/ 

cea/written-materials/2023/07/18/improvingaccess-affordability-and-quality-in-the-early-careand-education-ece-market/#_ftn2. 

need to lower family child care costs is 

urgent for those with children in child 

care now. The final rule does not alter 

Lead Agency flexibility to set copayment caps lower than 7 percent of 

family income, and we encourage Lead 

Agencies to ensure co-payments support 

affordability with lower co-payments. 

Comment: We received four 

comments, including one from a 

member of Congress, opposing our 

proposal to lower co-payments and 

questioning our regulatory authority to 

do so. 

Response: Section 658E(c)(5) of the 

Act requires Lead Agencies to establish 

and periodically revise a sliding fee 

scale that provides for cost-sharing for 

families receiving CCDF funds. The 

2014 reauthorization of the Act newly 

clarified that CCDF cost-sharing policies 

should not be ‘‘a barrier to families 

receiving assistance’’ under CCDF, and 

as noted above, high co-payments above 

7 percent are a barrier to families 

accessing child care assistance. Twentytwo members of Congress wrote in 

support of the proposal and indicated 

this regulatory change reflected 

statutory requirements. 

Comment: A few commenters shared 

concerns that limiting co-payments for 

CCDF families would increase child 

care costs for the middle class. 

Response: We anticipate that limiting 

co-payments for CCDF families will not 

change the amount the provider will 

receive for that child. Rather, it will 

transfer costs from parents who receive 

CCDF assistance to Lead Agencies so 

there is no reason to anticipate this will 

increase child care costs for families 

without subsidies, the middle class, or 

other families. Moreover, a recent study 

of child care subsidies in Minnesota 

demonstrated that child care subsidies 

increased the supply of child care while 

having a de minimis impact on child 

care costs.83 When the supply of child 

care increases in a community, all 

families benefit because they have more 

options and can more easily access 

child care. 

Comment: We received a few 

comments requesting clarity on the 

definition of family income used to 

implement the requirement. 

Response: We decline to provide a 

definition of family income in this final 

rule and continue to allow Lead 

Agencies the flexibility to specify how 

to define family income, which has 

implications for both a family’s 

eligibility for CCDF assistance and the 

family’s required co-payment amount. 

This flexibility allows Lead Agencies to 

determine how they want to define 

family unit and income. 

Comment: A few commenters 

requested flexibility to set co-payments 

above the 7 percent requirement for 

CCDF families with higher incomes or 

with multiple children in care. 

Response: We decline to permit 

family co-payments higher than 7 

percent of family income. The 7 percent 

of family income co-payment cap 

applies regardless of the number of 

children in a family in need of care to 

minimize the likelihood that cost is a 

barrier to child care access for that 

family. In addition, families 

participating in CCDF have low 

incomes, even those with incomes on 

the higher end of the eligibility 

threshold, making 7 percent of family 

income a substantial financial burden. If 

we were to allow the requested 

flexibility, families at the higher end of 

the CCDF eligibility threshold could be 

faced with child care costs well above 

the 7 percent threshold. For example, 

analyses show that the average 

household with income between 

$35,000 and $49,000 spends 

approximately 18 percent of their 

income on child care for their young 

children. This estimate excludes 

households that use child care but do 

not pay for it. When including all 

households (those paying for child care 

and those who do not pay), the average 

household in this income bracket still 

spends 8 percent of their income on 

child care.84

Comment: We received some 

comments expressing concern about 

tradeoffs to caseload while still 

acknowledging the value of lowering copayments, and we received a few 

comments requesting the ability to delay 

implementation of the requirement 

when a Lead Agency faces tradeoffs, 

such as reducing access to subsidies. 

Response: The Act prohibits costsharing policies that would be a barrier 

to child care access, and it is imperative 

that parent co-payments are not a barrier 

to child care access for families 

participating in CCDF so we are 

retaining the 7 percent co-payment cap. 

Comment: One comment requested 

that we require the Lead Agency to 

collect co-payments instead of 

providers. 

Response: The Act and regulation 

have never specified whether the Lead 

Agency or child care provider should be 

responsible for collecting co-payments 

from families, and we retained this 

approach so Lead Agencies retain the 

flexibility to determine their own 

policies on collecting co-payments. We 

encourage Lead Agencies to adopt 

policies that support child care provider 

operations. 

Comment: Some commenters were 

concerned the 7 percent cap would 

result in reduced payment rates to child 

care providers and requested additional 

safeguards above our commitment to 

ongoing monitoring of Lead Agency 

payment rates. 

Response: As explained in the NPRM, 

we strongly agree that the 7 percent copayment cap should not decrease the 

amount paid to the child care provider, 

but rather shift some of the cost from 

families to Lead Agencies. Under CCDF, 

payments to providers are a 

combination of the Lead Agency share 

and the parent share. Capping the 

amount of the parents’ share should 

result in a comparable increase to the 

Lead Agency’s share and thus has no 

impact on the total amount providers 

receive. To ensure clarity on this point, 

the final rule includes a new change at 

§ 98.45(n)(5) to require Lead Agencies to

demonstrate in their CCDF Plan how

they ensure that they are not reducing

the total payment (subsidy payment

amount and co-payment) given to child

care providers when implementing this

requirement. ACF expects to closely

monitor Lead Agency payment rates to

ensure reductions in family copayments do not shift to providers. As

will be discussed later, this also applies

when Lead Agencies exercise their

flexibility to waive co-payments for

preapproved populations of families

and any additional populations

proposed in the CCDF Plan.

Comment: We received mixed 

comments on state flexibility to allow 

child care providers to charge parents 

more than the established co-payment to 

cover the difference between the 

subsidy payment and the child care 

provider’s private pay rate, with some 

comments in support of allowing 

additional charges, while others 

opposed such charges. 

Response: This rule does not make 

any changes to the existing policies at 

§ 98.45(b)(5) that permit child care

providers to charge parents additional 

amounts to cover the difference between 

the subsidy payment and the child care 

provider’s private pay rate, as long as 

the Lead Agency has demonstrated that 


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the policy promotes affordability and 

access, though we agree this flexibility 

may present a barrier to access for some 

families. We strongly encourage Lead 

Agencies to set child care provider 

payment rates to cover the cost of care 

to minimize providers’ need for such 

policies. 

Waiving Co-payments. In the NPRM, 

we proposed to amend § 98.45(l)(4), as 

redesignated, to make it easier for Lead 

Agencies to waive co-payments for two 

additional populations—eligible 

families with income up to 150 percent 

of the federal poverty level and eligible 

families with a child with a disability as 

defined at § 98.2. We requested public 

comment on whether States would 

benefit from having the option to waive 

co-payments for other populations, as 

well as requesting commenters share 

potential additional categories of 

families for which co-payments could 

be waived. 

This final rule amends § 98.45(l)(4), as 

redesignated, to allow Lead Agencies 

the discretion to more easily waive copayments for specifically eligible 

families with incomes up to 150 percent 

of the federal poverty level, children 

who are in foster and kinship care, those 

experiencing homelessness, those with a 

child with a disability as defined at 

§ 98.2, and those enrolled in Head Start 

or Early Head Start (42 U.S.C. 9831 et 

seq.). Previous CCDF regulations 

allowed Lead Agencies to waive copayments for families with incomes up 

to 100 percent of the federal poverty 

level and this final rule increases that 

threshold to 150 percent. This rule does 

not alter the existing option that allows 

Lead Agencies to waive co-payments for 

families in need of protective services or 

to determine other factors for waiving 

co-payments. Lead Agencies have 

authority to define ‘‘other factors’’— 

such as family income above 150 

percent of the federal poverty level or 

any of the additional populations 

recommended in public comment but 

not included as part of this final rule 

(e.g., families who benefit from 

Temporary Assistance for Needy 

Families (TANF), adolescent parents, 

and the child care and Head Start 

workforce). 

Comment: There was strong support 

for allowing Lead Agencies the 

flexibility to waive co-payments for the 

proposed populations and only one 

comment in opposition. Supporters 

noted the importance of lowering child 

care costs for families and the one 

comment in opposition to the policy 

argued that families should be 

responsible for some of their child care 

expenses. Many comments in favor of 

the proposed changes also 

recommended we include additional 

populations of families for which copayments could be waived. 

Response: The final rule at 

§ 98.45(l)(4) as redesignated, retains the 

proposal and includes three additional 

populations in response to comments: 

families with children in foster and 

kinship care, families experiencing 

homelessness, and families with 

children enrolled in Head Start or Early 

Head Start (42 U.S.C. 9831 et seq.). 

According to the FFY 2022–2024 CCDF 

State and Territory Plans, 28 Lead 

Agencies currently waive co-payments 

for children in foster care, and 16 Lead 

Agencies currently waive co-payments 

for families experiencing homelessness 

either by defining the group as part of 

their definition of families in need of 

protective services or as an ‘‘other 

factor’’ determined by the Lead Agency. 

For children enrolled in Head Start or 

Early Head Start (42 U.S.C. 9831 et seq.), 

seven Lead Agencies are currently 

waiving co-payments for this group. 

Changes in this final rule will allow 

Lead Agencies to waive co-payments for 

families with children in foster and 

kinship care, families experiencing 

homelessness, and families with 

children enrolled in Head Start or Early 

Head Start (42 U.S.C. 9831 et seq.) 

without needing to define criteria for 

waiving co-payments and requesting 

approval for these groups in the CCDF 

Plan. 

As noted in the preamble of the 2016 

Final Rule, waiving CCDF co-payments 

for families in Head Start and Early 

Head Start, including children served by 

ACF-funded Early Head Start-Child Care 

partnerships, is an important alignment 

strategy. Head Start and Early Head 

Start are provided at no cost to eligible 

families, who cannot be required to pay 

any fees for Head Start services. By 

including children enrolled in Head 

Start or Early Head Start (42 U.S.C. 9831 

et seq.) as an additional population for 

waiving co-payments in this final rule, 

we are making it easier for Lead 

Agencies to support continuity of care 

for families. 

The 2014 reauthorization of the Act 

included several provisions to improve 

access to high-quality child care for 

children and families experiencing 

homelessness. Co-payments could serve 

as an additional barrier for families 

experiencing homelessness to access 

high-quality child care for their 

children. Therefore, this final rule 

makes it easier for Lead Agencies to 

waive co-payments for this population 

without needing to define criteria for 

waiving co-payments and requesting 

approval in the CCDF Plan. This change 

is consistent with the statute’s focus on 

improving CCDF services for children 

experiencing homelessness. 

While we acknowledge the benefits of 

including additional categories of 

families, we decline to include an 

exhaustive list of family categories for 

waiving co-payments, but this should 

not be interpreted as discouraging States 

and Territories from taking steps to 

reduce co-payments for families who do 

not fall within one of the preapproved 

categories included in this final rule. 

We strongly encourage Lead Agencies to 

take full advantage of the flexibility 

retained in this final rule to tailor copayment policy to reduce or eliminate 

financial barriers for families utilizing 

the CCDF program. According to FFY 

2022–2024 CCDF State and Territory 

Plan data, Lead Agencies are utilizing 

existing flexibilities to waive copayments through CCDF Plan approval 

for many of the populations 

recommended by commenters. For 

example, 20 Lead Agencies have CCDF 

Plan approval to waive co-payments for 

families who benefit from Temporary 

Assistance for Needy Families (TANF) 

and 9 Lead Agencies are approved to 

waive co-payments for adolescent 

parents. Notably, many commenters 

recommended waiving co-payments for 

members of the child care workforce. 

Some Lead Agencies waive or are 

considering waiving co-payments for 

child care workers, and we encourage 

Lead Agencies to consider whether 

proposing to waive co-payments for 

child care workers might be a helpful 

workforce strategy. 

Comment: We received some 

comments that supported allowing Lead 

Agencies to waive co-payments for 

family income thresholds higher than 

the proposed 150 percent federal 

poverty level. Some comments 

recommended providing the ability to 

waive co-payments for all families. 

Response: We support Lead Agencies 

minimizing co-payments for all families 

participating in CCDF and waiving copayments for many families. We 

strongly encourage Lead Agencies to 

significantly reduce co-payments for 

families, including waiving copayments for families with incomes 

higher than 150 percent of the federal 

poverty level. Lead Agencies are 

permitted to establish other criteria for 

waiving co-payments at a higher 

threshold in the CCDF Plan, at their 

discretion. Since section 658E(c)(5) of 

the Act (42 U.S.C. 9858c(c)(5)) requires 

that Lead Agencies establish a costsharing arrangement for families 

benefiting from assistance, we do not 

have the authority to allow Lead 

Agencies to eliminate the co-payment 


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requirement for all families receiving 

CCDF assistance. 

Comment: Some comments requested 

we require Lead Agencies to waive copayments for certain populations 

instead of maintaining it as an option 

for CCDF Lead Agencies. 

Response: We strongly encourage 

Lead Agencies to take advantage of the 

Act’s flexibility to waive co-payments 

for the preapproved populations 

included in the final rule, as well as any 

populations Lead Agencies choose to 

describe and propose in the CCDF Plan 

as part of their waiving policy. 

Comment: One commenter requested 

that we require co-payments be waived 

for siblings as part of the option to 

waive co-payments for families with 

children with disabilities. 

Response: As was proposed in the 

NPRM and retained in this final rule, 

the option to waive co-payments for 

eligible families with children with 

disabilities applies to the entire family 

(including siblings). Therefore, Lead 

Agencies have the flexibility to waive 

co-payments for all children within 

eligible families and not just for the 

child with a disability. While we agree 

with the commenter’s concerns, and we 

encourage Lead Agencies to take 

advantage of this flexibility and serve 

eligible families in the manner outlined 

in this final rule. 

Comment: Some comments raised 

concerns about possible reductions in 

provider payments if co-payments are 

waived. 

Response: Lead Agencies retain the 

flexibility to determine their own 

policies on waiving co-payments. If a 

Lead Agency chooses to waive copayments for preapproved populations 

outlined in this final rule or propose 

their own populations to waive in the 

CCDF Plan, we expect Lead Agencies 

not to decrease the amount paid to child 

care providers as a fiscal tradeoff. To 

ensure clarity on this point and be 

responsive to commenters’ concerns 

that costs could be shifted from families 

to providers, we added a requirement at 

§ 98.45(n)(5) that Lead Agencies 

demonstrate in their CCDF Plan how 

they will ensure they are not reducing 

the total payment (subsidy payment and 

co-payment) given to child care 

providers when establishing their 

sliding fee scale. This change applies to 

both the 7 percent requirement 

described earlier and any co-payments 

waived at the option of the Lead 

Agency. We encourage Lead Agencies to 

adopt policies that support child care 

provider operations that ensure 

providers do not experience a reduction 

in resources when serving families 

participating in the CCDF program. 

Comment: One commenter 

recommended that we allow copayments to be waived for families who 

are a member of a Tribe or Tribal 

consortium being served by a State or 

Territory CCDF Lead Agency. 

Response: We acknowledge the 

potential benefits of this 

recommendation and note a State or 

Territory CCDF Lead Agency is allowed 

to propose in their CCDF Plan to waive 

co-payments for families who are a 

member of a Tribe or Tribal consortium. 

Payment Practices. This final rule 

makes key changes at § 98.45(m) as 

redesignated, to improve CCDF payment 

practices in ways that will make it 

easier for child care providers to serve 

children with subsidies and increase 

parent choices in care. Lead Agency 

payment practices to providers are an 

important aspect of equal access and 

support the ability of providers to 

participate in CCDF, better cover the 

cost of care, and deliver high-quality 

care. This is consistent with section 

658E(c)(2)(S) (42 U.S.C. 9858c(c)(2)(S)) 

of the Act, which requires Lead 

Agencies to establish ‘‘payment 

practices of child care providers in the 

State that serve children who receive 

assistance under this subchapter [that] 

reflect generally accepted payment 

practices of child care providers in the 

State that serve children who do not 

receive assistance under this 

subchapter, so as to provide stability of 

funding and encourage more child care 

providers to serve children who receive 

assistance under this subchapter.’’ The 

same provision also requires Lead 

Agencies, ‘‘to the extent practicable, 

implement enrollment and eligibility 

policies that support the fixed costs of 

providing child care services by 

delinking provider reimbursement rates 

from an eligible child’s occasional 

absences due to holidays or unforeseen 

circumstances such as illness.’’ 

First, the final rule amends the 

language at § 98.45(m) as redesignated 

to require provider payment practices 

meet generally accepted payment 

practices used for families not 

participating in the CCDF program, 

unless the State or Territory can 

demonstrate that certain policies are not 

considered generally accepted payment 

practices in the private child care 

market for certain types of care. 

Previously, this language was only 

included in the regulatory text at (l)(3) 

when describing the requirement to pay 

providers based on a part-time or fulltime basis and to pay for reasonable 

mandatory registration fees. Previous 

(l)(3)(i) and (l)(3)(ii) are now 

redesignated as (m)(3) and (m)(4). This 

is slightly restructured from the NPRM 

in response to comments that reinforced 

the multiple types of payment practices 

reflected in generally accepted payment 

practices for the private child care 

market. The rule allows narrow 

exceptions for different payment 

practices for certain types of providers, 

such as relative providers, because it is 

more typical for a private pay family to 

pay a relative provider on an hourly 

basis, or out-of-school time programs 

that do not typically charge private pay 

families for absence days. In those cases, 

the Lead Agency must justify that they 

are not generally accepted payment 

practices in the private child care 

market in the CCDF Plan as required at 

§ 98.16(cc). However, though the rule 

allows Lead Agencies the option to 

demonstrate that in certain limited cases 

the policies included at (m) are not 

generally accepted payment practices in 

the private child care market, we do not 

expect to approve CCDF Plans that 

propose more than limited exceptions. 

Second, the final rule amends 

§ 98.45(m)(1) to require States and 

Territories ensure timely provider 

payments by paying providers 

participating in CCDF in advance of or 

at the beginning of the delivery of child 

care services to align with the Act’s 

requirement that Lead Agencies use 

generally-accepted payment practices. 

Paying child care providers in advance 

or at the beginning of service provision, 

also known as prospective payment, is 

the norm for families paying privately 

(e.g., payment for child care for month 

of February is due February 1st) because 

providers need to receive payment 

before services are delivered to meet 

payroll and pay rent. States and 

territories may meet this requirement at 

(m)(1) by paying child care providers in 

advance of providing child care 

services, (e.g., paying the provider on 

the 27th day of the month prior to the 

upcoming month of service), or by 

paying providers on the first day of 

service, (e.g., on Monday for that week 

of service). 

The final rule removes the current 

option at previous § 98.45(l)(1) for Lead 

Agencies to reimburse child care 

providers within 21 days of receiving a 

completed invoice. Paying providers on 

a reimbursement basis places an upfront 

burden on providers serving families 

participating in CCDF and makes it 

difficult for providers to accept child 

care subsidies. 

Lead Agencies have the flexibility to 

determine the length of the service 

period, and may choose to pay 

providers on a weekly, bi-weekly, or 

monthly basis, or another period as 

appropriate. As some families may 

choose to change child care providers in 


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the middle of a service period, Lead 

Agencies may delay the first payment to 

a new provider until the start of the next 

service period or adjust payments to 

providers following the change in a 

child’s enrollment. This flexibility helps 

Lead Agencies avoid paying two child 

care providers for the same hours of care 

for the same child, which is prohibited 

by CCDF. However, if a child was 

enrolled with a provider, the Lead 

Agency cannot require, except in cases 

of fraud or intentional program violation 

by the provider, that child care provider 

to return the subsidy funds they 

received, and these funds are not 

considered overpayments for purposes 

of error rate calculations. 

Some children may need to start 

receiving care during a service delivery 

period. We do not intend to limit when 

a child can begin receiving child care 

services, and States may pay child care 

providers retroactively for services that 

began in the middle of a service delivery 

period. Some children may need to start 

receiving care during a service delivery 

period. For the next complete service 

period, States must begin paying in 

advance or on the first day of the service 

period. States may also reimburse the 

child care provider a pro-rated amount 

that covers the partial time the child 

was enrolled. 

Third, the final rule at (m)(2) as 

amended, requires States and territories 

to pay child care providers based on a 

child’s authorized enrollment, to the 

extent practicable. Further, the final rule 

revises (m)(2) to require Lead Agencies 

who determine they cannot pay based 

on enrollment, to describe their 

alternative approach in the CCDF Plan, 

provide evidence that the proposed 

alternative reflects private pay practices 

for most child care providers in the 

State or Territory, and does not 

undermine the stability of child care 

providers participating the CCDF 

program. ACF only expects to approve 

alternative approaches in limited cases 

where a distinct need is shown. 

The final rule deletes the previous 

options at former paragraph (l)(2)(ii) that 

allowed for full payment if a child 

attended at least 85 percent of 

authorized time, and paragraph 

(l)(2)(iii), which allowed for full 

payment if a child was absent five or 

fewer days a month. The Act requires 

States and Territories, to the extent 

practicable, to implement enrollment 

and eligibility policies that support the 

fixed costs of providing child care 

services by delinking provider payment 

rates from an eligible child’s attendance, 

which includes occasional absences due 

to holidays or unforeseen 

circumstances, such as illness. Neither 

of the two now-deleted options 

supported a provider’s fixed operational 

costs, continuity of care for children, or 

reflect the norm for families paying 

privately, and going forward, ACF will 

not approve either option as an 

alternative approach to the requirement 

to pay providers based on enrollment. 

While States and Territories must 

base provider payments on a child’s 

enrollment under the final rule, Lead 

Agencies may continue to require child 

care providers submit attendance 

records to ensure children participating 

in CCDF are utilizing their subsidy. 

Moreover, this policy change does not 

affect the policy at § 98.21(a)(5)(i) that 

allows Lead Agencies to discontinue 

child care assistance prior to the next redetermination when there have been 

excessive unexplained absences despite 

multiple attempts to contact the family 

and provider, including prior 

notification of possible discontinuation 

of assistance. 

Comment: Most commenters strongly 

supported the proposed changes to 

move to paying prospectively and based 

on enrollment, noting that the changes 

were long overdue and will have a 

significant impact on child care 

providers. We received many comments 

sharing the positive impact of 

prospective payments based on 

enrollment, and the negative financial 

impacts of late payments from States 

and the lost revenue from not being paid 

when a child is absent. Commenters 

also noted the proposed changes can 

help move closer to financing the true 

cost of providing high-quality care. 

Others reinforced the fact that current 

practices of paying after provision of 

services or paying based on attendance 

have led some child care providers to 

choose not to participate in the subsidy 

program or to limit the number of 

children receiving subsidies that they 

will serve at any given time. 

A few commenters opposed the 

proposed changes and expressed 

concerns about the costs and systems 

changes that would be necessary to 

implement these changes, especially 

prospective payments. Others argued 

that Lead Agencies should maintain the 

flexibility to pay child care providers on 

a reimbursement basis and not cover all 

absence days. 

Response: The rule will increase 

parents’ options, make it easier for 

providers to accept subsidies, improve 

stability among child care providers 

serving children participating in CCDF, 

and aligns with generally accepted 

payment practices for private pay 

families. Therefore, we kept the changes 

mostly as proposed. In addition to 

requiring payment practices that meet 

generally accepted practices, the Act 

requires at section 658E(c)(4)(B)(iv) (42 

U.S.C. 9858c(c)(4)(B)(iv)) that payments 

be made to child care providers in a 

timely manner. Paying child care 

providers after they have provided 

services is not timely and instead is 

destabilizing and overlooks the fact that 

providers have many bills that must be 

paid at the beginning of the month. As 

noted above, States and Territories will 

have the option to justify if paying 

certain types of providers in advance of 

services is not a generally accepted 

private pay practice in their CCDF 

Plans. 

Comment: Some supporters noted 

these regulations will require many 

Lead Agencies to make IT and system 

updates that will take time and 

introduce new costs and questioned 

how the 60-day effective date would 

intersect with the likely timeline for 

these requirements. 

Response: We recognize that many 

States and Territories will have to make 

regulatory and systems changes to 

implement these requirements. To 

address these concerns, this rule 

includes the opportunity for 

implementation extensions via 

temporary waivers for up to two years. 

Comment: Some commenters asked 

for clarification related to the change at 

(m)(1) that requires Lead Agencies to 

pay providers in advance or at the 

beginning of services. 

Response: The NPRM proposed to 

require ‘‘prospective payments’’ at 

(m)(1) but based on the comments 

received and further review of State 

prospective payment policies, we 

revised the regulatory language to better 

reflect what we meant by ‘‘prospective 

payments’’ and replaced that term with 

more descriptive language. The central 

meaning of the proposal remains 

unchanged. We have also clarified 

earlier that payments may be made up 

until the first day of providing care. 

This language is based off suggestions 

from commenters, review of state 

regulations in States that already pay 

child care providers in advance, and 

language included in agreements 

between private pay parents and child 

care providers. As noted above, this 

does not limit Lead Agencies in the start 

date for a child to receive child care 

services. 

Comment: Some commenters asked us 

to define ‘‘enrollment’’ related to the 

proposed change at (m)(2)(i). This 

included asking us to state how many 

absences must be covered to consider a 

policy compliant with meeting payment 

based on enrollment. 

Response: We decline to include a 

definition of ‘‘enrollment’’ in the 


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regulatory language. However, in 

response to comments, we revised the 

regulatory language to say payment 

must be based on ‘‘authorized 

enrollment’’ (italics denote language 

added in final rule). We also decline to 

enumerate the number of absences that 

would be covered because that is 

contradictory to the requirement to 

delink payment from absences and pay 

based on authorized enrollment. As 

noted earlier, § 98.21(a)(5)(i) allows 

Lead Agencies to discontinue child care 

assistance prior to the next redetermination when there have been 

excessive unexplained absences despite 

multiple attempts to contact the family 

and provider, including prior 

notification of possible discontinuation 

of assistance. 

Comment: Some commenters 

requested we provide specific examples 

of policies that would be acceptable 

alternatives to paying based on 

enrollment. 

Response: We decline to specify what 

alternatives would be allowable. It is the 

Lead Agency’s responsibility to explain 

and justify how their alternative 

approach would not destabilize child 

care providers. ACF will review 

individual justifications, including data 

and other evidence, during CCDF Plan 

approval. As noted above, ACF will not 

approve alternatives that mirror the two 

now removed options (i.e., paying the 

full amount if a child attends at least 85 

percent of authorized time or if a child 

has five or fewer absences). 

Comment: A few commenters 

requested clarification as to whether 

child care providers must be paid for 

days providers are closed for in-service 

or professional development activities. 

Response: Parents that pay privately 

for child care are usually required to 

pay for days when providers are closed 

for holidays, in-service, or professional 

development activities. Lead Agencies 

are expected to cover the days providers 

are closed for holidays and other 

training and in-service days as part of 

paying a provider based on the child’s 

authorized enrollment, unless the Lead 

Agency can provide evidence this 

would not be considered a generallyaccepted payment practice for the 

private child care market. 

Comment: We requested comments 

and data about generally accepted 

payment practices and whether those 

proposed in the NPRM truly reflected 

generally accepted payment practices. 

Commenters widely agreed that paying 

in advance and based on enrollment 

reflected generally accepted payment 

practices in their areas, including child 

care providers, national organizations, 

and Lead Agencies. The National 

Association for the Education of Young 

Children (NAEYC) provided data from a 

survey conducted during the comment 

period that found 88 percent of 

providers stated that private pay 

families in their care pay prospectively 

for care. A survey of family child care 

providers found that 59 percent of 

programs received payment 

prospectively. 

Response: We appreciate commenters 

providing data and support for these 

policies, which reinforce that 

prospective payment and enrollmentbased payment are generally-accepted 

payment practices for family child care 

and center-based care in the private pay 

market. We have retained the proposals 

with minor adjustments to the 

regulatory language. 

Comment: We requested comments on 

other policies that may help build 

supply and stabilize the child care 

market. Commenters suggested a range 

of policies, including paying a child 

care provider by classroom or licensed 

capacity not by individual slots, setting 

different requirements for providers 

depending on the age of children in 

their care, and investing in child care 

facilities. 

Response: We appreciate these 

suggestions and encourage Lead 

Agencies to consider them as they 

continue to address inadequate child 

care supply. Some changes in other 

parts of this final rule, including 

revising the definition of major 

renovation to make it easier to invest in 

facilities improvements, reflect the goals 

of these comments. However, we have 

chosen not to make additional specific 

regulatory changes in this section. 

Comment: Some commenters noted 

that prospective payment and paying 

based on enrollment may not reflect 

generally accepted payment practices 

for certain types of care for providers, 

such as for school-age care or child care 

provided by relatives. 

Response: We acknowledge there may 

be some variation in how some types of 

providers are paid by private pay 

families, and therefore, we have 

clarified that Lead Agencies may 

propose limited exceptions to the 

requirements at § 98.45(m), if they can 

justify those exceptions reflect generally 

accepted payment practices for specific 

provider types or categories in the 

private pay market. 

Comment: Some commenters were 

concerned about the administrative 

burden associated with recoupment of 

funds in cases of payments for absence 

days. 

Response: When paying based on 

enrollment, payment for absences is not 

considered overpayment and does not 

get recouped, thus administrative 

burden should not increase because of 

this policy. Because Lead Agencies will 

not have to closely align attendance 

records with payments, we expect a 

decrease in administrative burden for 

Lead Agencies and child care providers. 

Lead agencies are expected to follow 

their own processes to ensure providers 

are paid appropriately. 

Comment: Some commenters 

expressed concerns about double paying 

child care providers for the same period 

if a child switches providers partway 

through the service period. 

Response: Lead Agencies are expected 

to implement processes to address if a 

child changes providers during a service 

period. Lead Agencies may choose to 

require providers to certify their 

expected enrollment prior to receiving 

their payment in advance and to submit 

documentation within a certain period 

to allow for adjustments for children 

who are newly enrolled or disenrolled 

in a program. 

Additional Payment Practices. This 

final rule newly adds § 98.45(n) to 

address Lead Agency payment practices 

that are only applicable to the child care 

subsidy system and do not have private 

pay equivalents. In such instances, a 

requirement to meet generally accepted 

payment practices under (m) is 

inappropriate. 

The final rule moves three existing 

provisions from (m) as redesignated to 

new paragraph (n). Paragraph (n)(1), 

redesignated from (l)(4), requires Lead 

Agencies to ensure that child care 

providers receive payment for services 

in accordance with a written agreement 

or authorization for services; (n)(2), 

redesignated from (l)(5), requires child 

care providers receive prompt notice of 

changes to a family’s eligibility status 

that may impact provider payments; and 

(n)(3), redesignated from (l)(6), requires 

that provider payment practices include 

timely appeal and resolution processes 

for any payment inaccuracies or 

disputes. 

The final rule adds at § 98.45(n)(4) 

that Lead Agency payment practices 

may include taking precautionary 

measures when a provider is suspected 

of fraud. For example, it may be prudent 

in such cases for the Lead Agency to pay 

a provider retroactively as part of a 

corrective action plan or during an 

investigation. 

Comment: Commenters expressed 

support for this allowance. 

Response: We agree Lead Agencies 

need to have the flexibility to adjust 

policies when providers may be 

suspected of fraud and have kept the 

regulatory language as proposed. 


ddrumheller on DSK120RN23PROD with RULES2
15394 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 

85 Instruction for Completion of Form ACF–696 

Financial Reporting Form for the Child Care and 

Development Fund (CCDF) State and Territory Lead 

Agencies. Office of Management and Budget (OMB) 

This final rule adds § 98.45(n)(5) to 

require States and Territories 

demonstrate in their CCDF Plan how 

they are ensuring they are not reducing 

the total payment (subsidy payment 

amount and co-payment) given to child 

care providers when implementing the 

requirement at § 98.45(l) to limit copayments to 7 percent of family income 

and waiving co-payments for additional 

families. A more detailed discussion of 

this addition, including related 

comments and responses, is earlier in 

this preamble at § 98.45(l). 

Subpart F—Use of Child Care and 

Development Funds 

Subpart F of the CCDF regulations 

establishes allowable uses of CCDF 

funds related to the provision of child 

care services, activities to improve the 

quality of child care, administrative 

costs, matching fund requirements, 

restrictions on the use of funds, and cost 

allocation. This final rule includes 

several changes in Subpart F, including 

requiring some use of grants or contracts 

for direct services and removing the 

obsolete phase-in of the quality setaside. 

§ 98.50 Child Care Services 

This final rule adds clarifying 

language at § 98.50(a)(3) that some 

grants or contracts must be used for 

slots for children in underserved 

geographic areas, infants and toddlers, 

and children with disabilities. 

Additionally, the final rule further 

clarifies that grants solely to improve 

the quality of child care services would 

not satisfy the requirement at § 98.30(b). 

This clarifying language is also added to 

the final rule at new paragraph 

§ 98.50(b)(4). 

Comment: As discussed in Subpart D, 

some commenters wanted clarification 

as to the definition of ‘‘grants and 

contracts’’ and whether the requirement 

is specific to direct services. 

Response: The final rule clarifies 

across sections §§§ 98.16(z), 98.30(b), 

and 98.50(a) that the requirement is for 

grants ‘‘or’’ contracts and is in reference 

to direct services. This clarification 

responds to some Lead Agencies and 

other commenters noting the 

appropriate mechanism for grants or 

contracts is different in each 

jurisdiction. All Lead Agencies define 

the terms ‘‘grants’’ and ‘‘contracts’’ 

differently, with each term carrying 

different requirements and processes. 

Due to the varying nature of how Lead 

Agencies define these terms, it would be 

impractical to provide a federal 

definition. Additionally, in response to 

comments asking for clarification about 

what counts as a direct service and if 

quality set-aside investments could 

count toward the grant or contract 

requirement, the final rule clarifies the 

definition of direct services to explicitly 

include grant or contracted slots. 

Specifically, additional language at 

§ 98.50(a)(3) adds the term ‘‘for slots’’ 

after ‘‘grants or contracts’’ and excludes 

grants solely to improve the quality of 

child care services like those in 

§ 98.50(b) from meeting the requirement 

set out in § 98.30(b). New paragraph 

§ 98.50(b)(4) clarifies these quality 

amounts cannot be used to satisfy the 

requirement at § 98.30(b) for grant or 

contracted slots. A final change was 

made to the financial reporting 

requirement at § 98.65(h)(3) to clarify 

that ‘‘direct services’’ can be for ‘‘both 

grant or contracted slots and 

certificates.’’ 

Comment: Some commenters 

expressed concerns about program 

integrity implications of requiring grants 

or contracts and asked specifically for 

ACF to clarify how provider changes 

should be handled. 

Response: We share commenters’ 

interest in strong program integrity and 

defer to Lead Agencies to define these 

parameters under their already existing 

systems. ACF is committed to providing 

technical assistance to Lead Agencies 

related to best practices in grants or 

contracting and in monitoring grants or 

contracts. 

Comment: Several comments noted 

that implementation of policies 

described (e.g., cost estimation model, 

presumptive eligibility) would 

necessitate feedback from people with 

direct experience and need to be 

adjusted to ensure that they work for 

families and providers. In addition, 

many parents, providers, and 

organizations representing parents and 

providers who participate in child care 

subsidy programs commented on how 

proposed policies would impact their 

experience, including expressing the 

need to be directly engaged to support 

successful implementation. 

Response: We agree that people with 

direct experience in the child care 

subsidy system, quality initiatives, and 

the child care market are critical 

stakeholders in successful 

implementation of CCDF policies and 

practices. We have added language to 

clarify that quality set-aside funds may 

be used to engage families and providers 

with direct experience, including 

compensation for time and related 

expenses. 

Quality Set-aside. Section 98.50(b)(1) 

reflects section 658G(a)(2)(A) of the Act 

(42 U.S.C. 9858e(a)(2)(A)), which 

includes a phased-in increase to the 

percent of expenditures states and 

territories must spend on activities to 

improve the quality of child care. The 

phase-in ended on September 30, 2020, 

with the statute maintaining a minimum 

9 percent quality set-aside thereafter. 

The final rule removes the phase-in 

schedule for the quality set-aside at 

§ 98.50(b)(1) because it is outdated. This 

update does not impact the current 

requirement for States and Territories to 

spend at least 9 percent of their total 

expenditures, not including State 

maintenance of effort funds, on quality 

activities. The final rule adds clarifying 

language to affirm that Lead Agencies 

are encouraged to engage parents and 

providers with direct experience in the 

child care subsidy system and with 

quality initiatives because successful 

implementation of this rule and other 

CCDF provisions depends on user 

feedback. The final rule also affirms that 

quality funds can be used for expenses 

related to such engagement. 

Similarly, the final rule strikes the 

outdated language at § 98.50(b)(2) that 

stemmed from Section 658G(a)(2)(B) of 

the Act (42 U.S.C. 9858e(a)(2)(B)) and 

included a new permanent requirement 

for States and Territories to spend at 

least 3 percent of total expenditures (not 

including State maintenance of effort 

funds) on activities to improve the 

quality and supply of child care for 

infants and toddlers but delayed the 

effective date of this requirement until 

FY 2017. This effective date is no longer 

necessary in the regulatory language and 

is now deleted. This update does not 

impact the current requirement for 

States and Territories to spend at least 

3 percent of their total expenditures (not 

including State maintenance of effort 

funds) on activities to improve the 

quality and supply of child care for 

infants and toddlers. 

Mandatory Funds. The final rule also 

amends § 98.50(e) to update regulations 

to align with policies implemented as 

part of the ARP Act of 2021 (Pub. L. 

117–2). In accordance with subtitle I, 

section 9801 of the ARP Act, Territories 

received permanent CCDF mandatory 

funds for the first time in FY 2021. 

Since CCDF did not provide Territories 

with CCDF mandatory funds prior to FY 

2021, the CCDF regulations did not 

include requirements of how Territories 

must spend CCDF mandatory funds. We 

made this change to codify the 

requirement included in the approved 

instructions for completing to the ACF– 

696 Financial Reporting Form for CCDF 

State and Territory Lead Agencies 85 that 


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Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 15395 

#0970–0510. https://www.acf.hhs.gov/sites/default/ 

files/documents/occ/instructions_for_completion_

of_form_acf-696_financial_reporting_form-for_ccdf_

state_Territory_lead-agencies.pdf. 

Lead Agencies spend at least 70 percent 

of CCDF mandatory and matching funds 

on specific populations related to TANF 

receipt (families receiving TANF, 

families transitioning from TANF, and 

families at-risk of becoming dependent 

on TANF) applies to Territories, as well 

as States. 

Comment: While one commenter 

incorrectly stated OCC proposed an 

increase in quality spending at 

§ 98.50(b)(1) or § 98.50(b)(2), other 

commenters affirmed these updates 

helped clarify and did not change 

existing requirements. Additionally, we 

received several comments in support of 

updating the regulation at § 98.50(e) to 

reflect mandatory funding that has been 

available to Territories since 2021. 

Response: As the regulatory language 

simply removes obsolete language, we 

have retained the language as proposed. 

Subpart G—Financial Management 

The focus of Subpart G is to ensure 

proper fiscal management of the CCDF 

program, both at the federal level by 

ACF and the Lead Agency level. The 

final rule changes to this section include 

adding recent statutory changes to the 

CCDF mandatory funds and revising 

CCDF expenditure reporting 

requirements. 

§ 98.60 Availability of Funds 

To reflect that Territories began 

receiving annual mandatory funds in FY 

2021 due to provisions in the ARP Act, 

this final rule makes two conforming 

changes at § 98.60(a) to specify where 

the regulations address mandatory 

funds for States and where they address 

mandatory funds for Territories. 

This final rule also includes a 

conforming change at paragraph 

§ 98.60(d)(3) to clarify that Territories 

must obligate mandatory funds in the 

fiscal year in which they were granted 

and must liquidate no later than the end 

of the next fiscal year. This aligns with 

CCDF State policy and is needed to 

clarify new requirements added in the 

ARP Act. The provisions at paragraphs 

(d)(4) through (8) have been renumbered 

accordingly. We did not receive 

comments on these proposed changes. 

§ 98.62 Allotments From the 

Mandatory Fund 

This final rule includes a conforming 

change at § 98.62(a) to align this 

regulation with previously discussed 

changes made to the Social Security Act 

in the ARP Act. We updated the 

statutory reference to the Social Security 

Act to specify the provision referenced 

section 418(a)(3)(A) (42 U.S.C. 

618(a)(3)(A)), and we deleted the 

reference to the amount reserved for 

Tribes pursuant to paragraph (b) to 

reflect that the ARP Act permanently 

changed the allocation of mandatory 

funds for Indian Tribes and Tribal 

organizations to be based on the amount 

set at section 418(a)(3)(B) of the Social 

Security Act (42 U.S.C. 618(a)(3)(B)) and 

no longer a percent of the total 

allocation. 

Finally, we added a new paragraph 

(d) to incorporate changes made in the 

ARP Act allocating mandatory funds to 

the Commonwealth of Puerto Rico, the 

United States Virgin Islands, Guam, 

American Samoa, and the 

Commonwealth of the Marianas Islands. 

Section 418(a)(3)(C) of the Social 

Security Act (42 U.S.C. 618(a)(3)(C)) 

requires funds to be allocated based on 

the Territories’ ‘‘respective needs.’’ In 

allotting these funds in FY 2021, ACF 

used the same formula used to allocate 

funds from the Discretionary funds at 

§ 98.61(b). This final rule codifies that 

reallotment formula in the regulations. 

The regulation specifies that the amount 

of each Territory’s mandatory allocation 

is based on (1) a Young Child factor— 

the ratio of the number of children in 

the Territory under five years of age to 

the number of children under five years 

of age in all Territories; and (2) an 

Allotment Proportion factor— 

determined by dividing the per capita 

income of all individuals in all the 

Territories by the per capita income of 

all individuals in the territory. 

Paragraph § 98.62(d)(2)(i) requires per 

capita income to be equal to the average 

of the annual per capita incomes for the 

most recent period of three consecutive 

years for which satisfactory data are 

available at the time the determination 

is made and determined every two 

years. 

Comment: We received several 

comments on the proposed additions to 

§ 98.62 on allotments from the 

mandatory fund to Indian Tribes and 

Tribal organizations. All comments on 

this proposed change expressed 

concerns about funding levels for Tribal 

CCDF programs. Some commenters 

acknowledged that the mandatory setaside was put forth by Congress in the 

ARP Act but wished to express 

disagreement with this change. 

Response: This rule makes no changes 

to funding levels for Tribal Nations. The 

rule simply reflects the permanent 

changes made in the ARP Act, such that 

the allocation of mandatory funds for 

Tribes be based on the amount set at 

section 418(a)(3)(B) of the Social 

Security Act, rather than a percent of 

the total allocated funds. This change 

was made by Congress in 2021 and 

reflected a 71 percent increase in 

mandatory CCDF funds for Tribes. 

§ 98.64 Reallotment and Redistribution 

of Funds 

This final rule updates § 98.64(a) to 

reflect that Territories began receiving 

mandatory funds in FY2021 due to the 

ARP Act. The regulation specifies that 

Territory mandatory funds are subject to 

redistribution and that mandatory funds 

granted to Territories must be 

redistributed to Territories. It further 

clarifies that only Discretionary funds 

awarded to Territories are not subject to 

reallotment and that Discretionary funds 

granted to the Territories that are 

returned after being allotted are reverted 

to the federal government. This final 

rule adds a new paragraph (e) to codify 

these procedures for redistributing 

Territory mandatory funds. We did not 

receive comments on these proposals. 

§ 98.65 Audits and Financial 

Reporting 

This final rule adds clarifying 

language at § 98.65(h)(3) that grants or 

contracts for child care services are 

considered a direct service expenditure. 

Comments: As discussed in Subpart 

F, many commenters wanted 

clarification about the definition of 

grant or contract for direct service and 

raised confusion about whether this 

definition of direct service includes 

grant or contracted slots. 

Response: In response to comments, 

the final rule clarifies at § 98.65(h)(3) 

that grant or contracted slots are 

considered a direct service. ACF will 

also make changes to the ACF–696 

instructions to further clarify this 

reporting requirement and how Lead 

Agencies should account for grant or 

contracted slots in financial reporting. 

Subpart H—Program Reporting 

Requirements 

Subpart H of the regulations includes 

administrative reporting requirements 

for Lead Agencies. 

§ 98.71 Content of Reports 

Data Amounts Charged Above Copayment. This final rule deletes the data 

element at § 98.71(a)(11) that required 

Lead Agencies to report any amount 

charged by a child care provider to a 

family receiving CCDF subsidy more 

than the co-payment set by the Lead 

Agency in instances where the 

provider’s price exceeds the subsidy 

payment amount. This data element 

created a burden on Lead Agencies and 

child care providers and was never 

implemented. Instead, we have revised 


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15396 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 

86https://www.federalregister.gov/documents/ 

2000/11/09/00-29003/consultation-andcoordination-with-indian-tribal-governments. 

87FY23 allocation https://www.acf.hhs.gov/occ/ 

data/gy-2023-ccdf-tribal-allocations-estimatedpending-final-child-count. 

88https://www.federalregister.gov/documents/ 

2023/07/27/2023-15930/request-for-informationmeeting-the-child-care-needs-in-tribal-nations. 

89https://www.regulations.gov/document/ACF2023-0003-1665. 

§ 98.45(f)(1) to include this information 

in what States and Territories must 

report in their market rate survey or 

alternative methodology reports related 

to providers charging families above the 

State set co-payment. In addition, States 

must continue to track through their 

market rate survey or approved 

alternative methodology or through a 

separate source how much CCDF child 

care providers charge amounts to 

families more than the required copayment as required at § 98.45(d)(2)(ii) 

and report on this data in their CCDF 

Plans as required at § 98.45(b)(5). 

This reporting requirement at 

§ 98.71(a)(11) was added to the CCDF 

regulations in 2016, but it was never 

added as a data element to the ACF–801 

(monthly case-level report) because 

when ACF proposed adding the data 

element to the ACF–801 as part of the 

Paperwork Reduction Act (PRA) process 

in 2018, five State CCDF Lead Agencies 

submitted comments objecting to the 

proposed new data element. Four States 

indicated that the element would create 

a reporting burden for families and/or 

providers, and that it would be 

challenging to collect and report 

accurate data. A State also argued that 

the new element was duplicative of 

information that States are required to 

report in their CCDF Plans, and would 

involve significant costs, especially for 

States with county administered CCDF 

programs. 

We requested comment on whether 

the data element should be removed, 

including potential implications of 

either instituting or removing the 

requirement. 

Comment: Most commenters on this 

proposal opposed deleting the element. 

They noted that with the proposal to 

cap family co-payments and included in 

this final rule at § 98.45(l) that it was 

critical to collect data about how much 

providers are charging families above 

the co-payment. 

A few commenters expressed support 

for the proposal to delete the data 

element, with one Lead Agency stating, 

‘‘it is very difficult to collect and extract 

the referenced data due to the wide 

variation in provider price points and 

co-payments.’’ 

Response: We agree with commenters 

the data intended to be captured by the 

original regulation is important to 

understand how much families 

receiving subsidies must pay out of 

pocket for child care. However, the 

ACF–801 is not the best data collection 

form to collect this information because 

it provides monthly case records for all 

children participating in CCDF. The 

information for the ACF–801 is mostly 

collected during a child’s eligibility 

determination and through state data 

systems. To collect the information for 

this data element, the State would have 

to create new reporting for child care 

providers, adding new burdens on child 

care providers. Further, these data do 

not need to be monthly to be useful. 

Therefore, this rule revises § 98.45(f)(1) 

to ensure such data is collected in a 

more appropriate manner. OCC will 

continue to collect and review State and 

Territory policies regarding allowing 

child care providers to charge the 

difference between the state subsidy rate 

and the provider’s private pay rate 

through the CCDF Plan pursuant to 

§ 98.45(b)(5). 

The final rule makes conforming 

renumbering changes to (a)(12) through 

(22). 

Presumptive Eligibility. This final rule 

adds a data element at § 98.71(b)(5) to 

require Lead Agencies implementing 

presumptive eligibility to report in the 

annual aggregate report (ACF–800) the 

number of presumptively eligible 

children ultimately determined fully 

eligible, the number who fail to 

complete documentation for full 

eligibility and the number who are 

determined ineligible after full 

verification. Comments and responses 

were discussed earlier under the related 

requirement at § 98.21(e). 

The final rule makes conforming 

renumbering changes to (b)(6) through 

(7). 

Subpart I—Indian Tribes 

This subpart addresses requirements 

and procedures for Indian Tribes and 

Tribal organizations applying for or 

receiving CCDF funds and serves as the 

Tribal summary impact statement as 

required by Executive Order 13175.86

CCDF currently provides funding of 

about $557 million annually 87 to 

approximately 265 Tribes and Tribal 

organizations directly or through 

consortia arrangements that administer 

child care programs for approximately 

520 federally recognized Indian Tribes. 

Tribal CCDF programs are intended for 

the benefit of Indian children, and these 

programs serve only Indian children. 

The Tribal CCDF program plays a 

crucial role in child care access and 

affordability. Below we discuss the 

Tribal CCDF program, Tribal 

consultation, and regulatory changes 

impacting this Subpart. 

The Act is not explicit in how many 

of its provisions apply to Tribes so ACF 

traditionally applies requirements of the 

Act to Tribes through regulation. In the 

years since the 2016 final rule, Tribal 

Lead Agencies have taken great efforts 

to implement CCDF programs in 

accordance with the regulations. Most 

CCDF Tribal Lead Agencies receive 

relatively small award sizes of less than 

$250,000 and have infrastructure and 

internal capacity that varies greatly from 

CCDF State Lead Agencies. ACF 

continues to hear from Tribes about 

needing additional program flexibilities 

to provide high quality child care to 

Indian children and families. The 

changes in this final rule as they apply 

to Tribal Lead Agencies are heavily 

informed by this feedback as well as the 

formal consultation conducted during 

the NPRM comment period. In addition, 

to provide a more in-depth and longterm opportunity for feedback on the 

Tribal CCDF program, ACF issued a 

Tribal Request for Information (RFI) that 

was open for comment from July 27, 

2023 to January 2, 2024.88

Tribal consultation and comments. 

ACF is committed to consulting with 

Tribal Nations prior to promulgating 

any regulation that has Tribal 

implications. Immediately following 

publication of the NPRM, ACF hosted a 

national webinar specifically for Tribal 

Lead Agencies to outline and discuss 

the proposed changes during the 

comment period. ACF held a formal 

consultation session virtually in July 

2023 with Tribal leaders and Tribal 

CCDF staff to discuss the impact of the 

proposed regulations on Tribes. Tribes 

and Tribal organizations were informed 

of these events through letters to Tribal 

leaders and announcements to Tribal 

CCDF administrators. ACF also 

distributed materials specifically 

addressing the impact of the proposed 

rule on Tribes. ACF published a 

consultation report on September 5, 

2023, which was posted as a 

supplemental document in the Federal 

Register on August 20, 2023 and 

includes information on consultation 

attendees as well as their specific 

comments.89 This final rule was 

informed by these conversations and 

comments. Most of the testimony and 

dialogue included support for the 

NPRM proposals, with some concerns 

raised related to fraud determinations, 

implementation timelines, technical and 

financial resources to implement the 

proposed changes. Comments related to 

fraud and intentional program 


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90https://congress.gov/115/plaws/publ93/PLAW115publ93.pdf. 

91https://www.acf.hhs.gov/occ/policy-guidance/ 

consolidate-ccdf-under-indian-employmenttraining-and-related-services. 

violations can be found earlier in this 

preamble as part of the discussion about 

presumptive eligibility at § 98.21. 

Unless explicitly stated in this 

Subpart, regulations in the 2016 final 

rule remain in effect for Tribal Lead 

Agencies. Below we discuss 

implications for 102–477 programs 

followed by a discussion of the changes 

to §§ 98.81, 98.83, and 98.84 in this final 

rule. 

102–477 programs. We note that 

Tribes continue to have the option to 

consolidate their CCDF funds under a 

plan authorized by the Indian 

Employment, Training and Related 

Services Consolidation Act of 2017 

(Pub. L. 115–93), originally established 

in 1992 (Pub. L. 102–477).90 This law 

allows federally recognized Tribes and 

Alaska Native entities to integrate 

federal grant programs for employment, 

training, and related services they 

provide to their communities into a 

single program plan, budget, and 

reporting system to address Tribal 

priorities. ACF publishes guidance for 

Tribes wishing to consolidate CCDF 

under the authority created in Public 

Law 102–477.91 However, the Bureau of 

Indian Affairs (BIA) within the 

Department of Interior (DOI) is the lead 

federal agency for implementing this 

program. 

§ 98.81 Application and Plan 

Procedures and § 98.83 Requirements 

for Tribal Programs 

Sliding fee scale. This final rule 

retains the proposed revision at 

§§ 98.81(b)(6)(vii) and 98.83(d)(1)(vi) to 

exempt all Tribal Lead Agencies from 

the requirement to establish a sliding fee 

scale and from the provision at 

§ 98.45(l) as redesignated to require 

parents to pay a co-payment. Therefore, 

all Tribal Lead Agencies newly have the 

flexibility to provide CCDF assistance to 

eligible families without any copayment. Previously, Tribes with 

medium and large allocations were 

subject to the requirements at § 98.45(l) 

while Tribes with small allocations had 

the flexibility to exempt all families 

from co-payments. 

Comment: Commenters supported 

this exemption. Some commenters were 

supportive of the exemption but were 

concerned with their ability to 

implement the change without new 

resources. 

Response: Eliminating co-payments 

for parents participating in CCDF is an 

option for Tribal Lead Agencies but not 

a requirement. Tribes concerned by 

funding constraints or other matters will 

have the flexibility to require copayments if they choose and their 

established sliding fee scale will not be 

subject to any requirements outlined in 

this final rule. If a Tribe chooses to 

require a parent co-payment, we 

encourage the required amount from 

families to be as minimal as possible 

and under 7 percent of a family’s 

income. 

Grants and contracts. This final rule 

maintains the proposed revisions at 

§§ 98.81(b)(6)(x) and 98.83(d)(1)(i) to 

exempt all Tribal Lead Agencies from 

the requirement to use some grants or 

contracts to provide direct services for 

underserved geographic areas, infants 

and toddlers, and children with 

disabilities as required for States and 

territories at §§ 98.16(z), 98.30(b)(1), and 

98.50(a)(3). Tribal Lead Agencies vary 

significantly in how they administer the 

CCDF subsidy program and a 

requirement to use grants or contracts is 

not feasible. Tribal Lead Agencies 

continue to have the option to use this 

funding mechanism for direct services. 

We did not receive comments on this 

area and have retained the language as 

proposed. 

Provider Payment Practices. The final 

rule at § 98.81(b)(6)(xii) exempts all 

Tribal Lead Agencies from the 

requirement to implement provider 

payment practices in accordance with 

§ 98.16(cc). 

Comment: While commenters were 

supportive of proposed changes to 

provider payment practices at 

§ 98.45(m), they also expressed concern 

about Tribal Lead Agencies’ ability to 

implement the changes, especially 

considering the variability in Tribal 

Lead Agencies infrastructure to make 

the necessary systems changes for these 

policies. 

Response: Based on these comments 

and our focus on providing additional 

flexibility for Tribal Lead Agencies 

given the range of infrastructure and 

capacities, we have chosen to exempt all 

Tribal Lead Agencies from the 

requirement to have provider payment 

practices that reflect generally accepted 

payment practices, including 

prospective payments based on 

enrollment. It is not clear whether these 

are generally accepted practices across 

Tribal communities, and the changes 

included in this final rule remain at the 

discretion of the Tribal Lead Agency. 

However, ACF strongly encourages 

Tribal Lead Agencies to ensure 

providers are paid in a timely manner 

and for children’s occasional absences. 

Quality Funds. Section 98.83(g)(1) 

previously included a phased-in 

increase to the percent of expenditures 

Tribal Lead Agencies must spend on 

activities to improve the quality of child 

care. The phase-in ended on September 

30, 2020. The final rule removes the 

phase-in schedule for the quality setaside at § 98.50(b)(1) because it is 

outdated. This update does not impact 

the current requirement for all Tribes to 

spend at least nine percent of their total 

expenditures on quality activities. 

Similarly, the final rule strikes the 

outdated language at § 98.83(g)(2), 

which included a new permanent 

requirement for Tribes with medium 

and large CCDF allocations to spend at 

least three percent of total expenditures 

on activities to improve the quality and 

supply of child care for infants and 

toddlers and delayed the effective date 

of this requirement until FY 2017. This 

date is no longer necessary in the 

regulatory language and is now deleted. 

This update does not impact the current 

requirement for Tribes with medium 

and large allocations to spend at least 

three percent of their total expenditures 

on activities to improve the quality and 

supply of child care for infants and 

toddlers. We did not receive comments 

on these technical changes. 

§ 98.84 Construction and Renovation 

of Child Care Facilities 

Section 98.84 describes the 

procedures and requirements for Tribal 

construction or renovation of child care 

facilities. This final rule extends the 

deadline for liquidating construction 

and major renovation funds, specifically 

by establishing a three-year obligation 

period and subsequent two-year 

liquidation period for construction and 

major renovation funds. 

Comment: We received a few 

comments on this proposal, all of which 

were supportive. Commenters 

emphasized that construction and major 

renovation projects can often take many 

years to plan and execute and the 

additional time would help to ensure 

that facilities are successfully built on 

Tribal lands. 

Response: We appreciate the feedback 

on this proposed change and are glad to 

see support for this proposal. We 

understand that construction and 

renovation of facilities can be vital to 

maintaining and increasing high quality 

child care for children and families. We 

also recognize that construction projects 

are complex, expensive, and often longterm, and can therefore take extended 

time to spend allotted funds. Therefore, 

we have maintained the proposed 

change to allow Tribal Lead Agencies 

up to 5 years to liquidate construction 

and major renovation funds, which 


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includes three years to obligate funds 

and an addition two years to liquidate. 

Previously, Tribal construction and 

major renovation funds did not have an 

obligation deadline. This final rule 

establishes a three-year obligation 

period to meet the statutory provision 

that limits grants to Tribal Lead 

Agencies to three years. As a Lead 

Agency cannot change the purposes of 

the funds after the obligation period, we 

have determined that we can allow 

additional time beyond the three years 

for liquidation. 

Comment: We asked for feedback on 

the potential establishment of guardrails 

to prevent circumvention of the 

obligation and liquidation requirements. 

Some commenters expressed a mix of 

support for increased flexibility with 

concerns about unnecessary proposed 

guardrails. 

Response: We appreciate the 

comments in response to this request. 

The final rule does not include 

additional limits related to major 

renovation and construction. 

Subpart J—Monitoring, NonCompliance, and Complaints 

This final rule does not make any 

changes to Subpart J. 

Subpart K—Error Rate Reporting 

Subpart K details requirements for the 

reporting of error rates in the 

expenditure of CCDF grant funds by the 

50 States, the District of Columbia, and 

Puerto Rico. In addition to the 

regulatory requirements at subpart K, 

details regarding error rate reporting 

requirements are contained in forms and 

instructions that are established through 

the Office of Management and Budget’s 

(OMB) information collection process. 

Under subpart K, this final rule makes 

changes to the content of error rate 

reports. 

§ 98.102 Content of Error Rate Reports 

To strengthen oversight and 

monitoring of program integrity risks, 

this final rule clarifies requirements at 

§ 98.102 for the State Improper 

Payments Corrective Action Plan (ACF– 

405). The final rule amends 

§ 98.102(c)(2) to expand the required 

components of error rate corrective 

action plans. Specifically, it requires at 

amended paragraph (c)(2)(ii) that 

corrective action plans include the root 

causes of errors as identified in the Lead 

Agency’s most recent ACF–404 

Improper Payment Report and other root 

causes. This change is based on 

recommendations from the Government 

Accountability Office (GAO) 20–227, 

Office of Child Care Should Strengthen 

Its Oversight and Monitoring of 

Program-Integrity Risks. The final rule 

also separates previous provision at 

(c)(2)(ii) into two provisions, with 

amended paragraph (c)(2)(iii) requiring 

detailed descriptions of actions to 

reduce improper payments and the 

name and/or title of the individual 

responsible for actions being completed 

and amended paragraph (c)(2)(iv) 

requiring milestones to indicate 

progress towards action completion and 

error rate reduction. Additionally, we 

revised paragraph (c)(2)(v), as 

redesignated, to clarify that the penalty 

at paragraph (c)(4) is tied to the Lead 

Agency’s completion of their action 

steps within one year as described in 

the timeline in their corrective action 

plan approved by the Assistant 

Secretary. 

The final rule also adds language at 

paragraph (c)(3) to clarify that the 

reference to ‘‘subsequent progress 

reports’’ includes State Improper 

Payments Corrective Action Plans 

(ACF–405). Progress reports, including 

the State Improper Payments Corrective 

Action Plan (ACF–405), will be required 

until the Lead Agency’s improper 

payment rate no longer exceeds the 

error rate threshold designated by the 

Assistant Secretary, which is currently 

10 percent. We added language at (c)(4) 

to strengthen OCC’s ability to assess a 

penalty if the State does not take action 

steps ‘‘as described.’’ We added the 

word ‘‘as’’ to clarify that they should not 

only take the action steps described, but 

that they should take them ‘‘as 

described.’’ The final rule specifies it 

will be at ACF’s discretion to impose a 

penalty for not following them ‘‘as 

described.’’ 

Comment: One commenter expressed 

support for the proposed change and 

recommended that OCC include the 

title, as opposed to the individual’s 

name, of the person responsible for the 

action to be included because of staffing 

changes that occur over time. 

Response: We appreciate the 

commenter’s recommendation and 

recognize that staff changes often 

happen during the corrective action 

period. Therefore, we have revised the 

proposed language to specify that the 

corrective action plan must identify the 

name and/or title of the individual 

responsible at § 98.102(c)(2)(iii). 

Comment: One commenter noted that 

this would be unnecessarily 

burdensome for Lead Agencies because 

the ACF–404 reports already allows for 

states to detail the root causes of errors. 

Response: OCC is not expanding the 

ACF–404, but rather, we are providing 

a clarification around the requirements 

for the ACF–405. The updated ACF–405 

provides a way for states to connect the 

root causes of error already identified in 

the ACF–404 with the action steps in 

the ACF–405. We do not expect this 

additional component to create a 

significant burden and that the value of 

the addition outweighs the burden. 

VII. Regulatory Process Matters 

Paperwork Reduction Act 

Under the Paperwork Reduction Act 

(44 U.S.C. 3501 et seq., as amended) 

(PRA), all Departments are required to 

submit to the Office of Management and 

Budget (OMB) for review and approval 

any reporting or recordkeeping 

requirements inherent in a proposed or 

final rule. As required by this Act, we 

will submit any proposed revised data 

collection requirements to OMB for 

review and approval. 

The final rule modifies several 

previously approved information 

collections, but ACF has not yet 

initiated the OMB approval process to 

implement these changes. ACF will 

publish Federal Register notices 

soliciting public comment on specific 

revisions to those information 

collections and the associated burden 

estimates and will make available the 

proposed forms and instructions for 

review. 

CCDF title/code Relevant section in the proposed 

rule 

OMB control 

No. Expiration date Description 

ACF–118 (CCDF State and Territory Plan).§§ 98.14, 98.15, and 98.16 (and 

related provisions).

0970–0114 02/29/2024 The final rule adds new requirements which States and Territories are required to report in 

the CCDF Plans. 


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CCDF title/code Relevant section in the proposed 

rule 

OMB control 

No. Expiration date Description 

ACF–118–A (CCDF Tribal Plan) 

Part I and Part II.

§§ 98.14, 98.16, 98.18, 98.81, and 

98.83 (and related sections).

0970–0198 4/30/2025 The final rule adds new requirements which Tribal lead agencies with medium and large allocations are required to report in 

the CCDF Plans. 

ACF–405 .........................................

(Error Rate Corrective Action Plan) 

§ 98.102 .......................................... 0970–0323 01/31/2025 The final rule modifies this information collection to add new 

components to the corrective action plans. 

ACF–800 (CCDF Annual Aggregate Child Care Data ReportStates and Territories).§ 98.71 ............................................ 0970–0150 03/31/2025 The final rule modifies this existing 

information collection to require 

States and Territories report on 

data related to presumptive eligibility. 

ACF–801 (CCDF Monthly Child 

Care Report—States and Territories).

§ 98.71 ............................................ 0970–0167 04/30/2025 The final rule removes the regulatory requirement to report information on additional fees 

charged to families, where applicable. This data element has 

never been added to the ACF– 

801 form. 

Consumer Education Website and 

Reports of Serious Injuries and 

Deaths.

§§ 98.33, 98.42 .............................. 0970–0473 05/31/2026 The final rule modifies this information collection to require posting information about parent copayments. 

The table below provides current 

approved annual burden hours and 

estimated annual burden hours for these 

existing information collections that are 

modified by this final rule. 

ANNUAL BURDEN ESTIMATES

Instrument Total number 

of respondents 

Total number 

of responses 

per 

respondent 

Current 

approved 

average 

burden 

hours per 

response 

Current annual 

burden hours 

Estimated 

average 

burden hours 

per response 

based on final 

rule 

Estimated 

annual 

burden hours 

based on 

final rule 

ACF–118 (CCDF State and Territory 

Plan) ..................................................... 56 1 200 3,733 205 3,827 

ACF–118–A (CCDF Tribal Plan) ............. 265 1 144 11,448 147 12,985 

ACF–405 (Error Rate Corrective Action 

Plan) ..................................................... 5 2 156 520 156 520 

ACF–800 (CCDF Annual Aggregate 

Child Care Data Report- States and 

Territories) ............................................ 56 1 40 2,240 40 2,240 

ACF–801 (CCDF Monthly Child Care Report—States and Territories) ................ 56 4 25 5,600 25 5,600 

Consumer Education Website ................. 56 1 300 16,800 315 17,640 

We did not receive any public 

comments on these burden estimates, 

which were included in the NPRM. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

(see 5 U.S.C. 605(b) as amended by the 

Small Business Regulatory Enforcement 

Fairness Act) requires federal agencies 

to determine, to the extent feasible, a 

rule’s impact on small entities, explore 

regulatory options for reducing any 

significant impact on a substantial 

number of such entities, and explain 

their regulatory approach. The term 

‘‘small entities,’’ as defined in the RFA, 

comprises small businesses, not-forprofit organizations that are 

independently owned and operated and 

are not dominant in their fields, and 

governmental jurisdictions with 

populations of less than 50,000. HHS 

considers a rule to have a significant 

impact on a substantial number of small 

entities if it has at least a 3 percent 

impact on revenue on at least 5 percent 

of small entities. The Secretary certifies, 

under 5 U.S.C. 605(b), as enacted by the 

RFA (Pub. L. 96–354), that this rule does 

not result in a significant impact on a 

substantial number of small entities, as 

this rule primarily impacts States, 

territories, and tribes receiving federal 

CCDF grants. Therefore, an initial 

regulatory flexibility analysis is not 

required for this document. 

Unfunded Mandates Reform Act of 1995 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA), Public 

Law 104–4, establishes requirements for 

federal agencies to assess the effects of 

regulatory actions on state, local, and 

tribal governments, and the private 

sector. Under section 202 of the UMRA, 

the Department generally must prepare 

a written statement, including a costbenefit analysis, for proposed and final 

rules with ‘‘federal mandates’’ that may 

result in expenditures by state, local or 

tribal governments, in the aggregate, or 


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92https://www.acf.hhs.gov/occ/data/gy-2023- 

ccdf-allocations-based-appropriations. 

93Unpublished ACF–801 Preliminary 

Administrative Data. 

94https://www.acf.hhs.gov/occ/report/acf-118- 

overview-state-territorial-plan-reporting. 

95CCDF Policies Database, 2020 data. https://

ccdf.urban.org/. 

the private sector, of $100 million in 

1995 dollars, updated annually for 

inflation. In 2023 the threshold is 

approximately $177 million. When such 

a statement is necessary, section 205 of 

the UMRA generally requires the 

Department to identify and consider a 

reasonable number of regulatory 

alternatives and adopt the most cost 

effective or least burdensome alternative 

that achieves the objectives of the rule. 

The regulatory impact analysis includes 

information about the costs of the final 

regulation. As described in the preamble 

to this final rule, several of the changes 

are at the option of states, territories, 

and tribes. In addition, states, territories, 

and tribes receive over $11 billion 

annually in federal funding to 

implement the program. 

Executive Order 13132 

Executive Order 13132 requires 

federal agencies to consult with state 

and local government officials if they 

develop regulatory policies with 

federalism implications. Federalism is 

rooted in the belief that issues that are 

not national in scope or significance are 

most appropriately addressed by the 

level of government close to the people. 

This rule does not have substantial 

direct impact on the states, on the 

relationship between the federal 

government and the states, or on the 

distribution of power and 

responsibilities among the various 

levels of government. This rule does not 

pre-empt state law. In large part, the 

changes included in the final rule are 

adopting practices already implemented 

by many states or are increasing 

flexibilities in administering the CCDF 

program. Therefore, in accordance with 

section 6 of Executive Order 13132, it is 

determined that this action does not 

have sufficient federalism implications 

to warrant the preparation of a 

federalism summary impact statement. 

Assessment of Federal Regulations and 

Policies on Families 

Assessment of Federal Regulations 

and Policies on Families Section 654 of 

the Treasury and General Government 

Appropriations Act of 2000 requires 

federal agencies to determine whether a 

policy or regulation may negatively 

affect family well-being. If the agency 

determines a policy or regulation 

negatively affects family well-being, 

then the agency must prepare an impact 

assessment addressing seven criteria 

specified in the law. ACF believes it is 

not necessary to prepare a family 

policymaking assessment (see Pub. L. 

105–277) because the action it takes in 

this final rule will not have any impact 

on the autonomy or integrity of the 

family as an institution. 

VIII. Regulatory Impact Analysis 

We have examined the impacts of the 

rule under Executive Order 12866, 

Executive Order 13563, the Regulatory 

Flexibility Act (5 U.S.C. 601–612), and 

the Unfunded Mandates Reform Act of 

1995 (Pub. L. 104–4). Executive Orders 

12866 and 13563 direct us to assess all 

benefits, costs, and transfers of available 

regulatory alternatives and, when 

regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety, and other advantages; 

distributive impacts; and equity). This 

analysis identifies economic impacts 

that exceed the threshold for 

significance under Section 3(f)(1) of 

Executive Order 12866, as amended by 

Executive Order 14094. 

We conducted an initial Regulatory 

Impact Analysis (RIA) in the Notice of 

Proposed Rulemaking to estimate and 

describe the expected costs, transfers, 

and benefits resulting from the proposed 

rule. This included evaluating State and 

Territory polices in the major areas of 

policy change: Eligibility, Payment 

Rates and Practices, and Family Copayments. Due to limitations in data, we 

did not include Tribal policies in our 

analysis. 

Based on feedback received during 

the public comment period, we have 

further refined these estimates for the 

final rule. Some of the more substantial 

changes made in this version of the RIA 

include: 

• Systems Costs: This RIA now 

includes a systems cost estimate to 

account for possible IT changes needed 

to implement requirements in the final 

rule; 

• Administrative Data: All the 

calculations in this RIA have been 

updated to use FY 2021 Preliminary 

ACF–801 data, which was not available 

when writing the NPRM; and 

• Delineating between Required and 

Optional Policies: The RIA includes 

projections for both policies required by 

the rule and for those that are at Lead 

Agency option. This version of the RIA 

has been restructured to better clarify 

which policies are required and which 

are optional. 

A. Context and Assumptions 

All changes in this rule are allowable 

costs within the CCDF program and we 

expect activities to be paid for using 

CCDF funding. Each year, 

approximately $11.6 billion in federal 

funding is allocated for CCDF.92 In 

addition to the federal funding, States 

may contribute their own funds to 

access additional federal funds, 

increasing total FY 2023 CCDF funding 

to about $13.7 billion. At the same time, 

Federal funding for child care has never 

been sufficient to serve all eligible 

children and support consistent access 

to high quality programs. Some States 

have also been increasing state 

investment in child care beyond the 

required levels, but even with combined 

federal and state resources, states have 

to make difficult trade offs. Without 

additional funding, these trade offs will 

continue as Lead Agencies implement 

provisions in this rule, including 

balancing quality improvements, 

enrolling additional children, and 

investing in polices that promote 

stability for enrolled families. However, 

Lead Agencies have flexibility in how 

they implement many of the provisions 

and may adjust other policies to offset 

or account for additional costs 

associated with policy changes. They 

may also draw from other federal 

funding streams to support the policy 

changes included in this rule, including 

through allowable transfers from TANF. 

1. Baseline 

To get an accurate account of the 

costs, transfers, and benefits of this rule, 

we first established a baseline for 

current CCDF State and Territory 

practices. The policies described in this 

RIA represent the most current 

information available regarding the 

policies that were in place at the time 

that this final rule was published. The 

Lead Agency data and policies 

described in this RIA are gathered 

primarily from: 

• ACF–801 (2021, preliminary): 93

This is case-level data that are collected 

monthly. The preliminary 2021 data are 

the most recent data available. 

• ACF–118 (State and Territory Plan, 

2022–2024): 94 This is the application 

for CCDF funds and provides a 

description of, and assurances about, 

the Lead Agency’s child care program 

and all services available to eligible 

families. Data from the FFY 2022–2024 

State and Territory Plans were the most 

current data available. 

• CCDF Policies Database (2020): 95

The CCDF Policies Database, managed 

by the Office of Planning, Research, and 


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96Unpublished ACF–801 Preliminary 

Administrative Data. 

97 Ibid. 

98For ACF–801 reporting purposes, ‘‘legally 

operating without regulation’’ means a legally 

operating, unregulated child care provider that, if 

not participating in the CCDF program, would not 

be subject to any state or local child care 

regulations. https://www.acf.hhs.gov/sites/default/ 

files/documents/occ/ACF-801_Form_and_

Instructions_for_federal_fiscal_years_FY2023_and_

later.pdf. 

Evaluation (OPRE) and the Urban 

Institute, is a single source of 

information on the detailed rules for 

States’ and Territories’ CCDF child care 

subsidy programs. Data was from the 

‘‘State Variations in CCDF Policies as of 

October 1, 2020. 

Since dollar figures are collected from 

reports that span different years, we 

adjust all dollar amounts to account for 

inflation. For the purposes of this RIA, 

all dollar figures were converted to 2023 

dollars. 

TABLE 1—AVERAGE MONTHLY ADJUSTED NUMBER OF FAMILIES AND

CHILDREN SERVED

[FY 2021] 96

Average number of 

families 

Average number 

of children 

797,200 ........................... 1,313,700 

TABLE 2—NUMBER OF CHILD CARE PROVIDERS RECEIVING CCDF FUNDS

[FY 2021] 97

Licensed or regulated Legally operating without regulation 98

Total 

Child’s home Family 

home 

Group 

home Center 

Child’s home Family home Group home 

Center 

Relative NonRelative Relative NonRelative Relative NonRelative 

114 44,510 20,289 70,204 11,213 4,266 46,791 12,172 0 0 5,310 214,861 

2. Implementation Timeline 

Provisions included in the final rule 

are effective 60 days from the date of 

publication of the final rule. 

Compliance with provisions in the final 

rule would be determined through ACF 

review and approval of CCDF Plans, 

including Plan amendments, as well as 

through other federal monitoring, 

including on-site monitoring visits as 

necessary. 

While this rule does not have specific 

implementation dates for individual 

provisions, we acknowledge that it may 

take Lead Agencies some time to 

implement the policies included in this 

final rule particularly since some of 

these are at the Lead Agency’s option 

and some of the changes in this final 

rule may require State, Territory, or 

Tribal legislative or regulatory action in 

order to implement. During the public 

comment period, we received a number 

of comments about the one year 

implementation period. Commenters 

pointed out that implementing these 

changes would require a significant 

amount of time, especially when 

factoring in the changes that require 

legislative approval. Therefore, in 

response to comments received during 

the public comment period, we are 

allowing Lead Agencies the option to 

request transitional and legislative 

waivers for 2 years, which will allow up 

to two years of implementation instead 

of one. 

This revised cost estimate assumes a 

two year ramp up period. Our 

projections assume a third of the full 

costs/transfers/benefits in year 1, twothirds in year 2, with full 

implementation in year 3 and the 

following years. The exception to this is 

the systems-related cost estimate. Since 

this represents the upfront cost of 

changing IT systems, those will be split 

evenly across the implementation 

period and will not have an ongoing 

cost in year 3 and beyond. The costs, 

transfers, and benefits in this estimate 

are phased-in as follows: 

• Year 1: One third of the full costs/ 

transfers/benefits estimate, with half of 

the cost of the systems-related estimate. 

• Year 2: Two-thirds of the full costs/ 

transfers/benefits estimate, with half of 

the cost of the systems-related estimate. 

• Years 3 through 5: Full costs/ 

transfer/benefits estimate, with no 

systems-related cost since that would no 

longer apply. 

The RIA examines the potential costs, 

transfers and benefits over a 5 year 

window. During the public comment 

period, it was clear that some 

commenters were confusing the 5 year 

window with the implementation 

timeline. To clarify, the 5 year 

examination window is not the 

implementation timeline. The purpose 

of the 5 year window is to examine the 

impact of the regulation over time. 

Since the projected costs, transfers, and 

benefits stabilize by the beginning of 

year 3, we chose a 5 year window for 

our projections. 

3. Need for Regulatory Action 

Congress last authorized the Act in 

November 2014. In September 2016, 

HHS published a final regulation, 

clarifying the new provisions of the Act 

and building on the priorities that 

Congress included in reauthorization. In 

the years since then, HHS has carefully 

explored the successes and challenges 

in the Act’s implementation, learned 

from the experiences of Lead Agencies, 

providers, families, and early educators, 

and assessed the impact and 

implications of the COVID–19 public 

health emergency. 

The revisions in this final rule are 

designed to build on the work of the 

past, creating a program that effectively 

supports child development and family 

economic well-being. 

These policies will help families 

access high-quality child care and 

mitigate myriad negative consequences 

of inadequate access to care. 

Specifically, the revisions: 

• Lower child care costs for families, 

• Improve parent choice and 

strengthen child care payment practices, 

and 

• Streamline the process to access 

child care subsidies. 

CCDF plays a vital role in helping 

families with low incomes afford child 

care and go to work, but some current 

regulations do not adequately support 

families or further CCDF’s purpose and 

goals. This regulatory action provides 

much needed direction to improve 

access to affordable child care by 

lowering parents’ costs and increasing 

parents’ child care options. Further, this 

regulatory action provides additional 

clarity around what is and what is not 

allowed. 

B. Analysis of Transfers and Costs 

OMB Circular A–4 notes the 

importance of distinguishing between 

costs to society as a whole and transfers 

of value between entities in society. 

While some of these policies may 

represent budget impacts to CCDF Lead 


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99https://www.cdc.gov/nchs/fastats/births.htm. 

100https://www.urban.org/sites/default/files/ 

publication/39156/2000082-absenteeism-in-dcpublic-schools-early-education-program_0.pdf. 

101Ansari, A., and Purtell, K.M. (2018). 

Absenteeism in Head Start and Children’s 

Academic Learning. Child Development, 89(4): 

1088–1098. 

Agencies, from a society-wide 

perspective, they mostly redistribute 

costs from one portion of the population 

to another. 

Most of the impacts from these 

provisions are categorized as transfers. 

These transfers between entities are 

discussed in more detail later in this 

regulatory analysis. The exceptions are: 

• Administrative costs associated 

with grants and contracts; 

• IT systems-related costs associated 

with prospective payment, enrollmentbased payment, and grants and 

contracts; and 

• Benefits associated with 

encouraging an online component to the 

initial eligibility application process. 

During the public comment period, 

we requested comment about potential 

systems needs to get a better 

understanding of the potential need in 

this area. We received comments about 

the cost to updating IT systems in order 

to comply with the requirements in the 

final rule and received some examples 

from Lead Agencies about the scope of 

the changes that would need to be 

made. The systems estimate was not 

included in the version of RIA in the 

NPRM, since the public comment 

period sought additional information on 

this matter. Based on the information 

we received, we are adding this systems 

cost to this version of the RIA. The 

discussion of this estimate is included 

in Systems (Cost) section below. 

The RIA examines the impact of both 

required and recommended policies, 

which our calculations estimate the 

annualized impact to be $206.6 million 

in transfers, $13.1 million in costs, and 

$15.3 million in benefits. However, it is 

important to distinguish between the 

policies that Lead Agencies are required 

to implement and the policy options 

which Lead Agencies are allowed to 

choose whether or not to adopt. To 

make this distinction as clear as 

possible, we are organizing our analysis 

by required and optional policies in the 

final rule. Based on the calculations in 

this RIA, we estimate the quantified 

impact of the required policies in the 

final rule to be an annualized amount of 

$57.2 million in transfers and $9.0 

million in costs. We estimate the 

quantified impact of the optional 

policies in the final rule to be an 

annualized amount of $149.4 million in 

transfers, $4.1 million in costs, and 

$15.3 million in benefits. 

1. Transfers and Costs To Implement 

Requirements in the Final Rule 

In this RIA, we examine all the 

components of the final rule that project 

to have an economic impact. Of those 

that are required, we have identified 

Additional Child Eligibility, 

Enrollment-based Payment, and the 

Permissible Co-payments as transfers, 

while Grants and Contracts and 

Systems-related costs are designated as 

costs. When we isolate just those 

policies that are required in the final 

rule, we project an annualized total of 

$57.2 million in transfers and an 

annualized total of $7.9 million in costs. 

Additional Child Eligibility (Transfer): 

This policy clarifies how Lead Agencies 

must comply with current regulations 

by offering at least a full 12 months of 

eligibility to all children receiving CCDF 

subsidies, even if they are additional 

children in a family already 

participating in CCDF. Currently some 

Lead Agencies are out of compliance 

with this requirement by limiting the 

eligibility period for an additional child 

until the end of the existing child’s 

eligibility period, at which point all 

children in the family would be redetermined. This clarification benefits 

children currently participating in 

CCDF because it increases the length of 

time they would receive child care 

subsidies, but for this estimate, is 

considered a transfer because those 

funds are not being used to enroll new 

children into the CCDF program. The 

estimate for this is based on the 

following assumptions: 

• Number of Additional Children: We 

do not currently have data on the birth 

rate of new children among CCDF 

families, however, according to the 

CDC, the fertility rate is 56.3 births per 

1,000 women aged 15–22, or 5.63 

percent.99 For the sake of this analysis, 

we are assuming that 5 percent of the 

current CCDF population would have a 

new child within the year. We then 

applied this to the number of families 

served (ACF–801 data) to estimate the 

number of new children per year. 

• Average Number of Additional 

Months of Care: For this estimate, we 

are assuming that the new children 

would receive an average of 6 additional 

months of care (or half of the required 

minimum 12-month eligibility) due to 

this policy. Since the minimum would 

be zero months and the maximum 

would be twelve months, absent specific 

data in this area, taking the middle 

between the maximum and the 

minimum amount of possible assistance 

was the most reasonable estimate and 

one that would minimize a misestimate. 

• Number of Lead Agencies Currently 

Out of Compliance: We calculated the 

percentage of Lead Agencies that would 

need to change their policies to comply 

with this new policy, examining the 

range of transfer amounts if 5 percent 

and 45 percent of Lead Agencies needed 

to come into compliance. However, 

based on policy questions received 

since the 2016 final rule, for this 

estimate we calculate that a quarter of 

Lead Agencies will have to update their 

policies, so we are taking 25 percent of 

the total estimate. 

Using the above assumptions and 

applying the average weighted subsidy 

amount (ACF–801 data), we came to an 

annualized transfer amount of $31.4 

million. 

Enrollment-based Payment (Transfer): 

This policy requires Lead Agencies to 

pay providers based on enrollment 

instead of attendance. During the 

comment period, we received comments 

in support of this policy including one 

that cited a survey that showed 80 

percent of child care center directors, 

administrators and family child care 

owners, and operators who responded 

to the survey would be more likely to 

serve CCDF families if the Lead Agency 

paid based on enrollment instead of 

attendance. To estimate the financial 

impact of this policy, we used data from 

the CCDF Policy Database and the CCDF 

State and Territory Plans to determine 

(1) which Lead Agencies would need to 

change their policy, (2) how many 

absence days those Lead Agencies are 

currently allowing, and (3) how many 

additional days of care they would have 

to pay for under this new policy. 

To begin, we had to identify an 

average absence rate for children in 

child care. According to a 2015 study of 

Washington DC’s Head Start program,100

students were absent for eight percent of 

school days on average. This works out 

to 1.8 days per month (weekdays only). 

However, seven percent of children 

missed 20 percent or more of enrolled 

days (equivalent to 4.4 or more 

weekdays per month). In another study 

among a nationally representative 

sample of Head Start children, children 

were on average absent 5.5 percent of 

days (or 1.2 days per month).101

However, 12 percent of children were 

chronically absent, that is, absent for 

more than ten percent of days (or more 

than 2.1 days per month). And in a 

study of kindergarten attendance in one 

county in a mid-Atlantic state, 

researchers found that on average, 

kindergartners missed 9.9 days of school 


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102Ansari, A. (2021). Does the Timing of 

Kindergarten Absences Matter for Children’s Early 

School Success? School Psychology, 36(3): 131– 

141. 

103Morrison, J. (May 23, 2018). Are Young 

Children Really Sick All The Time? AAP Journals 

Blog. https://publications.aap.org/journal-blogs/ 

blog/1994/Are-Young-Children-Really-Sick-All-TheTime? 

104https://www.acf.hhs.gov/sites/default/files/ 

documents/occ/Characteristics_of_Families_and_

Children_FY2020.pdf. 105https://www.bls.gov/oes/current/oes_nat.htm. 

(out of the entire school year); that 

works out to about 1 day per month.102

During the public comment process, a 

commenter referenced an American 

Academy of Pediatrics study 103 on 

child illness, saying that the data in this 

study suggests that the RIA may have 

been underestimating the rate of 

absences. However, upon closer 

examination of the data in that study, it 

showed that children are sick an average 

of 14 times over the first 3 years of life, 

for a median of 94 days over those 3 

years. This works out to 31 days per 

year or 2.6 days per month. When we 

adjust to account for weekdays vs. 

weekends, this comes to an average 

estimate of 1.8 sick weekdays per 

month, which is consistent with the 

Head Start estimates referenced above. 

Taking the literature into 

consideration, this estimate assumes 

that a small number (12 percent) of 

children would be absent 5 days a 

month; the remaining children would be 

absent only 2 days a month. We then 

calculated how many additional days 

per month each State would have to pay 

for when they adopt this new policy. 

We then applied that number of 

additional days to the average daily 

subsidy rate (based on ACF–801 data). 

This gave us an annualized total of 

$13.2 million. 

Permissible Co-payments (Transfer): 

This policy determines co-payments 

above 7 percent of a family’s income to 

be an impermissible barrier to child care 

access and prohibits them. We 

categorize this policy as a transfer 

because it transfers the cost from 

families who would otherwise pay high 

out of pocket costs or forgo care to Lead 

Agencies. 

To calculate this, we took the CCDF 

State and Territory Plan data on family 

co-payments, where Lead Agencies 

report their lowest and highest co-pay 

amounts. Lead Agencies report the 

family income levels associated with 

those co-payment amounts, so we then 

calculated what the 7 percent threshold 

would be and how many of the reported 

co-payments were above that threshold. 

There were 22 Lead Agencies that 

reported co-payment levels above 7 

percent of the family’s income. This 

impacts over sixty thousand CCDF 

families. Since CCDF State and Territory 

Plan data includes the exact amount of 

the co-payment, we were able to 

calculate precisely how much of each 

co-payment was above the 7 percent 

threshold. Using CCDF data on the 

number of families, we estimated the 

cost burden that would be transferred 

from families to Lead Agencies. 

Since the highest co-pay amounts 

would only apply to CCDF families at 

the highest income levels, we used 

ACF–801 data which shows that 19 

percent of families are in the highest 

income category (above 150 percent of 

federal poverty line (FPL)).104 When we 

apply the current amount of co-pay over 

7 percent to these families, we get an 

annualized transfer amount of $12.6 

million. 

This is a likely overestimate, because 

while families with incomes above 150 

percent of FPL are the highest income 

category in our available data, not all of 

these families would be paying the 

highest possible co-payment. Families 

remain federally eligible for CCDF until 

their incomes reach 85 percent of State 

Median Income, which is significantly 

higher than 150 percent of FPL. 

Additionally, there may be families with 

incomes below 150 percent of FPL that 

are currently paying above the 7 percent 

co-pay threshold, however those 

families would likely be more than 

offset by the overestimate included in 

our methodology. 

We received comments in this area 

from Lead Agencies stating that while 

they understand the intent of this 

requirement, it would take some time 

and changes to their current subsidy IT 

system. In recognition of comments in 

this area, we have adjusted the 

implementation timeline (through 

transitional waivers) and added a 

systems-related estimate to this RIA. 

Grants and Contracts (Cost): To 

address lack of supply for certain types 

of care, the final rule also requires the 

use of some grants and contracts for 

direct services. Grants or contracts can 

be one of the most effective tools to 

build supply in underserved geographic 

areas and for underserved populations. 

They also have the benefit of providing 

greater financial stability for child care 

providers. 

To estimate the financial impact of 

implementing the grants and contracts 

requirement, we estimated the costs for 

a small, medium, and large States based 

on FFY 2021 CCDF caseload that 

include staff to manage grants and 

contracts (program manager, fiscal office 

staff, monitoring staff), travel, and 

administrative costs. For staff costs, we 

identified staff positions necessary to 

accomplish the kind of changes that 

would be necessary to implement these 

policies and used national BLS wage 

data 105 to estimate the amount of salary 

needed for implementation. This 

included program managers ($92,720 

annual salary), fiscal office staff 

($49,710 annual salary), and monitoring 

staff ($59,650 annual salary). As with 

other cost estimates, we multiplied 

salary data by two to account for 

benefits. Since we know that there 

would be a range of possible costs, we 

estimated a high-end and low-end 

estimate for each of these items. For 

staffing, the estimate included a range of 

staffing expectations depending on the 

size of the state. For the high-end 

estimates, this ranged from 

approximately one and a half FTEs for 

small States to over three designated 

FTEs in the larger States. The low-end 

estimates assume that States already 

have infrastructure and personnel for 

grants and contracts in place so the 

estimates assign part time duties to 

handle the new requirement. The costs 

were based on information gathered by 

the technical assistance providers that 

have worked with Lead Agencies on 

implementing grants and contracts. We 

applied these estimated costs to those 

States that are not currently using grants 

and contracts in a manner that is 

consistent with the requirement. 

We averaged these costs over the 5- 

year window used for this analysis, 

taking into account the 2-year phase-in 

period, and came to an estimated 

annualized amount of $4.9 million to 

implement this policy. 

Systems (Costs): During the public 

comment period, we asked for comment 

in this area and received comments 

stating that there would be a cost to 

updating IT systems in order to comply 

with the requirements in the final rule. 

This estimate was not included in the 

RIA of the NPRM, but now that we have 

received additional information and 

context, we are adding this to this 

version. One commenter mentioned the 

delinking provider payments from child 

attendance required 6 months to make 

the required changes to their existing 

systems. In another example, the 

commenter mentioned that it took over 

a year to revise their procurement 

system in order to implement 

prospective payments. Another 

commenter said that the proposed 

changes would take a minimum of one 

year to implement and requested a twoyear delay in implementation to ensure 

successful rollout. In response to these 

and related comments, we have 


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106BLS Database https://www.bls.gov/oes/ 

current/oes_nat.htm. 

expanded the implementation timeline 

to two years (through transitional and 

legislative waivers) and added this 

systems cost estimate to the RIA. 

Lead Agency IT systems needs will 

vary widely depending on a number of 

factors, including but not limited to the 

current state of the IT system and which 

Lead Agencies have already 

implemented some of these policies 

(particularly those Lead Agencies who 

utilized COVID-related funding to 

implement policies now covered by the 

final rule). Rather than trying to 

estimate the individual systems cost of 

individual provisions, we used a 

method based on projected FTEs, 

including costs associated with 

contractors and procurement, needed to 

make these changes. This estimate is 

meant to cover a number of provisions 

in the final rule, some of which are 

required and some that are optional. 

Since the allocation of expenses to 

required versus optional policies will 

depend on each state’s needs, for the 

purposes of this estimate we are evenly 

distributing the costs, with 50 percent of 

this systems estimate assigned to 

required policies and 50 percent of the 

systems estimate assigned to optional 

policies. 

First, we identified staff positions 

necessary to accomplish the kind of 

changes that would be necessary to 

implement these policies. The staff that 

we identified from the BLS database 106

were: Project Manager (Computer 

Systems Design and Related Services) 

with an annual salary of $113,950, 

Computer and Information Systems 

Managers (which includes the duties of 

a business and systems analyst) with an 

salary of $173,670, Database Architects 

at an annual salary of $136,540, and 

Database Administrators with an annual 

salary of $102,530. For the purposes of 

these calculations, we took wage data 

from the BLS database and multiplied 

the average salary for each position by 

two to account for employee benefits. 

To develop our range of estimates, we 

came up with three scenarios: a low, 

medium, and high estimate to represent 

three different potential levels of need. 

For each tier, we estimated the number 

of employees (and the percentage of 

their time) necessary to handle a volume 

of changes. The tiers are as follows: 

• Low Need (equivalent to 1.25 FTEs 

or 2,600 project hours): 1 Project 

Manager (25 percent), 1 Computer and 

Information Systems Manager (25 

percent), 1 Database Architect (25 

percent), and 1 Database Administrator 

(50 percent). Cost per Lead Agency: 

$315,000 for the full two-year 

implementation period. 

• Medium Need (equivalent to 2.5 

FTEs or 5,200 hours): 1 Project Manager 

(50 percent), Computer and Information 

Systems Manager (50 percent), 1 

Database Architect (50 percent), and 1 

Database Administrator (100 percent). 

Cost per Lead Agency: $630,000 for the 

full two-year implementation period. 

• High Need (equivalent to 5 FTEs or 

10,400 hours): 1 Project Manager (100 

percent), 1 Computer and Information 

Systems Manager (100 percent), 1 

Database Architect (100 percent), and 2 

Database Administrators (100 percent). 

Cost per Lead Agency: $1.3 million for 

the full two-year implementation 

period. 

Since each State’s need will vary 

depending on the current state of their 

IT system and the particular policies 

they are attempting to implement, for 

the purposes of this RIA, we assume an 

even distribution of one third of the 

States at each tier of need. Based on this 

analysis, we estimated the total systems 

cost for the implementation window 

would be $41.0 million. When 

distributed across the implementation 

window, that comes to approximately 

$20.6 million per year for the first two 

years, half of which would be to 

implement the required policies in the 

rule. Since this is the cost of an upfront 

IT systems change, once those changes 

are complete, our estimate does not 

include an ongoing cost in years 3 

through 5. The projected cost of this 

would be $10.3 million per year to 

implement required policies over the 2 

year implementation period. When 

projected out over the 5 year 

examination window (which is the 

timeframe we are using to analyze all 

other policies in the RIA), the 

annualized cost is $4.1 million for 

implementing required policies in the 

final rule. 

TABLE 3—REQUIREMENTS IN THE FINAL RULE, TRANSFERS AND COSTS

[$ in millions] 

Implementation 

period 

(years 1–2) 

Ongoing annual 

average 

(years 3–5) 

Annualized transfer amount 

(over 5 years) 

Total present value 

(over 5 years) 

Undiscounted 

Discounted 

Undiscounted 

Discounted 

3% 7% 3% 7% 

Transfers ($ in millions) 

Additional Child Eligibility ...................... $19.6 $39.2 $31.4 $31.0 $30.5 $156.9 $146.2 $133.7 

Enrollment-based Payment ................... 8.3 16.5 13.2 13.1 12.9 66.2 61.6 56.4 

Permissible Co-payments ..................... 7.9 15.7 12.6 12.4 12.2 62.9 58.6 53.6 

Total ............................................... 35.7 71.5 57.2 56.5 55.5 285.9 266.4 243.7 

Costs ($ in millions) 

Grants and Contracts ............................ 3.1 6.1 4.9 4.8 4.8 24.5 22.8 20.9 

Systems ................................................. 10.3 0 4.1 4.3 4.5 20.6 20.3 19.9 

Total ............................................... 13.3 5.1 9.0 9.1 9.3 450 43.1 40.7 

2. Transfers and Costs To Implement 

Optional Policies in the Final Rule 

In addition to the above requirements, 

this rule makes new clarifications that 

show a range of policy options that Lead 

Agencies have at their disposal. While 

these are not required, we do encourage 

Lead Agencies to adopt these policies 

when possible and are therefore 

accounting for the potential impacts in 

this RIA. For these optional policies, we 

have identified Presumptive Eligibility, 

Paying Full Rate, Waiving Co-payments 

as transfers. For costs in this area, we 


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I I I I I 

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107https://www.medicaid.gov/medicaid/ 

enrollment-strategies/presumptive-eligibility/ 

index.html. 

108Adams, G. (2008). Designing Subsidy Systems 

to Meet the Needs of Families: An Overview of 

Policy Research Findings. Washington, DC: Urban 

Institute. https://www.urban.org/sites/default/files/ 

publication/31461/411611-Designing-SubsidySystems-to-Meet-the-Needs-of-Families.pdf. 

109Unpublished Preliminary FY 2021 CCDF 

Administrative Data. 

110https://www.acf.hhs.gov/occ/report/acf-118- 

overview-state/territorial-plan-reporting. 

111Unpublished Preliminary FY 2021 CCDF 

Administrative Data. 

are allocating the remaining 50 percent 

of the overall Systems cost estimate to 

the implementation of optional policies. 

When we isolate the transfer and cost 

impact of optional policies in the final 

rule, we project an annualized total of 

$149.4 million in transfers and an 

annualized total of $4.1 million in costs. 

Presumptive Eligibility (Transfer): 

This policy permits, but does not 

require, CCDF Lead Agencies to allow 

families to begin receiving child care 

assistance before all required 

documentation has been submitted. 

Presumptive eligibility primarily 

constitutes a transfer from families, who 

would otherwise pay unsubsidized 

child care costs or forego costs while 

their application is under review, to 

Lead Agencies. More specifically, if 

some families who receive presumptive 

assistance are found to be ineligible 

once full documentation is received, 

that would be considered a transfer of 

resources between certain populations 

of families. 

Based on other programs that have 

used presumptive eligibility, such as 

Medicaid and the Children’s Health 

Insurance Program (CHIP), we do not 

anticipate this will be a high percentage 

of families, particularly since Lead 

Agencies using this policy can put in 

place documentation requirements that 

would limit the number of families that 

are inaccurately determined to be 

eligible. However, to the extent these 

cases may occur, they would represent 

a transfer of funds from CCDF-eligible 

children to CCDF-ineligible children. 

The cost in this estimate relies on the 

following assumptions: 

• Estimated Number of Children: Not 

all families would need to use 

presumptive eligibility. Given that this 

is a new policy and there is not data to 

support some of the variables in this 

estimate, for the purposes of this 

calculation, we calculated that of the 

children applying for CCDF, only a 

fraction will actually utilize 

presumptive eligibility. This estimate 

assumes that every month, a number 

equal to 5 percent of the current CCDF 

population would use the presumptive 

eligibility option. 

• Anticipated Lead Agency Take-up: 

This policy is not required, and we do 

not anticipate that all Lead Agencies 

will adopt this policy option. For the 

purposes of the RIA, we used reports 

showing 21 States currently use 

presumptive eligibility for Medicaid and 

CHIP 107 (as of August 31, 2021) as a 

proxy for those Lead Agencies that 

would also adopt it for CCDF. We are 

not assuming that these exact same 

States will also use presumptive 

eligibility, but we believe that it is 

helpful in estimating the percentage of 

families for whom this policy would 

apply. 

• Percentage of Children Eventually 

Determined Ineligible: An Urban 

Institute study on presumptive 

eligibility found a small number of 

families receiving presumptive 

eligibility were eventually found to be 

ineligible.108 The study does not cite a 

specific figure, but a low estimate seems 

reasonable because CCDF Lead Agencies 

can put safeguards in place (e.g., 

requiring certain documentation before 

allowing presumptive eligibility) that 

would limit the number of families that 

are eventually determined ineligible. 

The estimate currently assumes that 5 

percent of presumptive eligibility 

families—a small subset of families 

receiving CCDF—would eventually be 

found ineligible. We examined a range 

of possibilities for families that may 

eventually be found ineligible, with 

estimates as high as 10 percent and as 

low as 2.5 percent of presumptive 

eligibility families. However, lacking 

any specific data in this area, we believe 

that 5 percent is a reasonable estimate. 

• Amount of Time that CCDFIneligible Children will Receive Care: 

The range of possible months of 

assistance that a family could receive 

through this policy is between zero and 

3 months. Since this is a new policy, 

absent relevant data, we are estimating 

that families will receive half of the 3 

months allowed by the policy (6 weeks) 

before they are found to be ineligible. 

Applying the average subsidy amount 

of approximately $8,400 per year 109

(which has been adjusted for inflation to 

2023 dollars) to the above assumptions, 

we calculated an annualized transfer of 

$16.4 million for this policy. 

Paying Established Payment Rate 

(Transfer): This policy codifies existing 

policies that Lead Agencies may pay 

child care providers the full published 

subsidy rate even if the provider’s 

private pay rate is lower to help cover 

the cost of providing care. We are 

categorizing this as a transfer because it 

would transfer the cost burden from the 

providers (who are currently providing 

equivalent services at relatively low 

rates) to the CCDF Lead Agency. 

There are several limitations in the 

data that are discussed below. Given 

these limitations we initially used two 

different methods to assess the cost 

burden in the NPRM, which were used 

to validate each other. While the two 

approaches used very distinct 

methodologies, they arrived at similar 

estimates. However, data limitations 

preclude us from using both 

methodologies for the final rule. In the 

final rule, we updated our estimates 

throughout the RIA to reflect the most 

recent FY21 data, but do not have FY21 

microlevel data. However, since the two 

analyses validated each other for the 

FY20 data set in the NPRM, we feel 

confident using our updated FY21 

projection from Approach 1, described 

below. 

• Base Subsidy Rates vs. Actual 

Payments (Approach 1): For this 

approach, we examined the following 

factors: 

Æ Base Subsidy Rates versus Actual 

Subsidy Payments: We examined the 

difference between the (1) Base Subsidy 

Rate as reported in the CCDF State and 

Territory Plans 110 and (2) the Average 

Subsidy Rate (the government portion of 

actual payments, excluding parent copayment) as reported in the ACF–801 

data.111 To the extent that the average 

subsidy payment is lower than the 

reported base subsidy rate, we are 

attributing a portion of this difference to 

current policy limitations (i.e., Lead 

Agencies currently paying providers no 

more than their private pay rate). While 

there may be a variety of factors 

explaining why the average subsidy 

payment is lower than the base payment 

rate (including co-payments), such as 

variation in attendance, for the purposes 

of this estimate we are attributing 25 

percent of this difference to current 

policy limitations. 

Note: The average subsidy payment figures 

in this calculation also include payments to 

providers that are above the reported base 

rate due to tiered reimbursement rates for 

higher quality and other characteristics. We 

did not have the data necessary to remove 

those payments. However, we still wanted to 

adjust our figures to account for these 

payments. Approach 2 (described below) 

used microdata to remove payments above 

the base rate from the sample and found that 

the difference between base rate and actual 

payments was twice as large as the amount 

when those payments remained in the 

sample. Using this information, we applied a 

factor of two to increase our estimate, 

simulating the removal of such payments 

(those paying above the base rate) from our 

sample. 


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Æ Setting: We looked at two sets of 

data: one for Family Child Care Home 

providers (including Group Homes) and 

another for Child Care Centers. We 

combined the estimates from each of 

these to come to the final total. 

Æ Anticipated Take-up: Since this is 

not required and is an option already 

available to Lead Agencies, we 

examined a range of implementation 

rates. The annual amount for this 

estimate could be as high as $394 

million if 25 percent of States adopted 

this policy and as low as $79 million if 

only 5 percent of States chose to 

implement. However, actual take-up 

will likely depend on availability of 

funding and given that this policy 

option is already available to Lead 

Agencies, we believe that a take-up rate 

in the middle to lower end of our 

estimated range would be the most 

accurate. For the purposes of this 

estimate, we assume that 10 percent of 

Lead Agencies will take up this policy. 

Our calculation for approach #1 gave 

us an annual estimated transfer of 

$157.4 million when fully implemented 

and using the most recent FY 21 CCDF 

Administrative Data. 

Once we take into account the 2-year 

implementation period, we have a final 

annualized transfer estimate of $126.0 

million per year to implement this 

provision. 

Waiving Co-payments for Additional 

Populations (Transfer): This policy 

allows Lead Agencies to choose to more 

easily waive co-payments for families 

with incomes up to 150 percent of FPL, 

families with children in foster and 

kinship care, and for eligible families 

with children with disabilities. Lead 

Agencies currently are automatically 

allowed this flexibility for families up to 

100 percent of FPL and for vulnerable 

populations (and may propose to waive 

co-payments beyond 100 percent of FPL 

so long as they have a sliding scale). 

One Lead Agency submitted a comment 

highlighting an internal survey of 

participating families that showed the 

positive impact of waiving co-payments, 

which allowed families to continue to 

work or go back to work, explore 

educational opportunities, and achieve 

better financial security. To calculate 

the financial impact of this policy, we 

used state-by-state data (ACF–801) to 

determine how many CCDF families 

currently have a co-payment. This 

eliminates families from the estimate 

that already have their co-pays waived. 

We then look at the low and high co-pay 

amounts (as reported in the CCDF State 

and Territory Plans) and apply it to the 

remaining CCDF families based on the 

income distribution of CCDF families 

(ACF–801 data). We did not conduct 

separate estimates for children in foster 

and kinship care and children with 

disabilities because we have limited 

data on current co-payments for these 

populations. 

For the purposes of this estimate, we 

applied the low co-payment level to 

families with incomes between 0–100 

percent of FPL and the high co-payment 

levels to families with incomes between 

100–150 percent of FPL. We note that 

this is likely an overestimate because 

families with incomes in the 100–150 

percent of FPL range are not the highest 

earning families in the CCDF program 

(which allows income up to the higher 

threshold of 85 percent of State Median 

Income, though this varies by state). 

We then calculated the number of copayments that would be waived if a 

subset of Lead Agencies implemented 

this policy. We calculated the transfer 

amount for a range of possibilities, 

including scenarios with a low estimate 

of 5 percent of Lead Agencies 

implementing the policy and a high 

estimate of 45 percent of Lead Agencies. 

However, based on anecdotal evidence 

and policy questions that have been 

submitted to OCC by Lead Agencies, we 

chose to use a midpoint of 25 percent 

implementation for the RIA. 

Then, because Lead Agencies would 

have the option for how widely they 

chose to waive co-payments and how 

they apply these waivers to families 

within the State or territory, we 

estimated this at different tiers, showing 

the cost if Lead Agencies waived copays for 25 percent, 50 percent, 75 

percent, and 100 percent of families 

with incomes under 150 percent of FPL. 

For the purposes of this cost estimate, 

we are assuming that the States 

adopting this policy will waive co-pays 

for 75 percent of families with incomes 

under 150 percent of FPL. This gave us 

an annualized transfer amount of $7.1 

million to implement this policy. 

Systems (Costs): We explain our 

methodology for the systems estimate 

above. When distributed across the two 

year implementation window, we 

estimate approximately $20.6 million 

per year for the first two years. Since 

this is the cost of an upfront IT systems 

change, once those changes are 

complete, our estimate does not include 

an ongoing cost in years 3 through 5. 

The projected cost of this would be 

$10.3 million per year to implement the 

optional policies over the 2 year 

implementation period. When projected 

out over the 5 year examination window 

(which is the timeframe we are using to 

analyze all other policies in the RIA), 

the annualized cost is $4.1 million for 

implementing optional policies in the 

final rule. 

TABLE 4—OPTIONAL POLICIES IN THE FINAL RULE, TRANSFERS AND COSTS

[$ in millions] 

Implementation 

period 

(years 1–2) 

Ongoing annual 

average 

(years 3–5) 

Annualized transfer amount 

(over 5 years) 

Total present value 

(over 5 years) 

Undiscounted 

Discounted 

Undiscounted 

Discounted 

3% 7% 3% 7% 

Transfers ($ in millions) 

Presumptive Eligibility ........................... $10.2 $20.4 $16.4 $16.2 $15.9 $81.8 $76.2 $69.7 

Paying Established Payment Rate ....... 78.7 157.4 126.0 124.4 122.3 629.8 586.8 536.7 

Waiving Co-payments for Additional 

Populations ........................................ 4.5 8.9 7.1 7.1 6.9 35.7 33.3 30.4 

Total ............................................... 93.4 186.8 149.5 147.6 145.2 747.2 696.2 636.8 

Costs ($ in millions) 

Systems ................................................. 10.3 0 4.1 4.3 4.5 20.6 20.3 19.9 

Total ............................................... 10.3 0 4.1 4.3 4.5 20.6 20.3 19.9 


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I I I I I 

I I I I I 
Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 15407 

112Child Care Aware of America. (2022). Price of 

Care: 2021 child care affordability analysis. 

Arlington, VA: Child Care Aware of America 

https://www.childcareaware.org/catalyzing-growthusing-data-to-change-child-care/#ChildCare

Affordability. 

113National Survey of Early Care and Education 

Project Team (2022): Erin Hardy, Ji Eun Park. 2019 

NSECE Snapshot: Child Care Cost Burden in U.S. 

Households with Children Under Age 5. OPRE 

Report No. 2022–05, Washington DC: Office of 

Planning, Research and Evaluation (OPRE), 

Administration for Children and Families (ACF), 

U.S. Department of Health and Human Services 

(HHS). https://www.acf.hhs.gov/opre/report/2019- 

nsece-snapshot-child-care-cost-burden-ushouseholds-children-under-age-5. 

114Hill, Z., Bali, D., Gebhart, T., Schaefer, C., & 

Halle, T. (2021) Parents’ reasons for searching for 

care and results of search: An analysis using the 

Access Framework. OPRE Report #2021–39. 

Washington, DC: Office of Planning, Research, and 

Evaluation, Administration for Children and 

Families, U.S. Department of Health and Human 

Services. https://www.acf.hhs.gov/opre/report/ 

parents-reasons-searching-early-care-andeducation-and-results-search-analysis-using. 

115National Center for Education Statistics. 2019. 

National Household Education Surveys Program 

2019. https://nces.ed.gov/nhes/young_children.asp. 

116Scott, E.K., Leymon, A.S., & Abelson M. 

(2011). Assessing the Impact of Oregon’s 2007 

Changes to Child-Care Subsidy Policy. Eugene, 

Oregon: University of Oregon; Grobe, Deana & 

Weber, Roberta & Davis, Elizabeth & Scott, Ellen. 

(2012). Struggling to Pay the Bills: Using MixedMethods to Understand Families’ Financial Stress 

and Child Care Costs. 10.1108/S1530– 

3535(2012)0000006007. 

117Morrissey, Taryn W. ‘‘Child care and parent 

labor force participation: a review of the research 

literature.’’ Review of Economics of the Household 

15.1 (2017): 1–24. https://link.springer.com/ 

content/pdf/10.1007/s11150-016-9331-3.pdf. 

118Lieberman, A. et al. (2021). Make Child Care 

More Stable: Pay by Enrollment. New America. 

119Workman, S. (2020). Grants and Contracts: A 

Strategy for Building the Supply of Subsidized 

Infant and Toddler Child Care. Center for American 

Progress. 

120Lieberman, A. et al. (2021). Make Child Care 

More Stable: Pay by Enrollment. New America. 

121Workman, S. (2020). Grants and Contracts: A 

Strategy for Building the Supply of Subsidized 

Infant and Toddler Child Care. Center for American 

Progress. 

122 Greenberg, E. et all (2018). Are Higher Subsidy 

Payment Rates and Provider-Friendly Payment 

Policies Associated with Child Care Quality? Urban 

Institute. 

123Adams, G. and Compton, J. (2011). ClientFriendly Strategies: What Can CCDF Learn from 

Research on Other Systems? Urban Institute. 

C. Analysis of Benefits 

The changes made by this regulation 

have the following primary benefits: 

• Lowering parents’ cost of care; 

• Expanding parents’ options for 

child care; 

• Strengthening payment practices to 

child care providers; 

• Making it possible for more 

providers to accept families with 

subsidy; and 

• Easing family enrollment into the 

subsidy program. 

Implementation of this rule will have 

direct impacts on two primary 

beneficiaries: working families with low 

incomes and child care providers 

serving children receiving CCDF 

subsidy. 

In examining the benefits of this rule, 

there are both benefits that we were able 

to quantify (e.g., applying online) and 

other benefits that, while we were not 

able to quantify for this analysis, have 

very clear positive impacts on children 

funded by CCDF, their families who 

need assistance to work, child care 

providers that care for and educate these 

children, and society at large. Where we 

are unable to quantify impacts of 

policies, we offer qualitative analysis on 

the benefit that the regulation will have 

on children, families, child care 

providers, and the public. 

Lowering the cost of child care: For 

many families, child care is 

prohibitively expensive. In 34 States 

and the District of Columbia, enrolling 

an infant in a child care center costs 

more than in-state college tuition.112

More than 1 in 4 families, across income 

levels, commits at least 10 percent of 

their income to child care. Households 

with incomes just above the federal 

poverty level are most likely to commit 

more than 20 percent of their income to 

child care.113 In response, families often 

seek out less expensive care—which 

may have less rigorous quality or safety 

standards—or parents, particularly 

women, exit the workforce entirely.114

Among other purposes, Congress 

designated the Act to ‘‘promote parental 

choice,’’ to ‘‘support parents trying to 

achieve independence from public 

assistance,’’ and to ‘‘increase the 

number and percentage of low-income 

children in high-quality child care 

settings’’ (sec. 658A(b), 42 U.S.C. 

9857(b)). High co-payments undermine 

these statutory purposes. Despite 

receiving child care subsidies, child 

care affordability remains a concern for 

families with low incomes and prevents 

families from feeling empowered to 

make child care decisions that best meet 

their needs. In 2019, 76 percent of 

surveyed households that searched for 

care for their young children had 

difficulty finding care that met their 

needs. Among this group, when 

respondents were asked the main reason 

for difficulty, the most common barrier 

was cost, followed by a lack of open 

slots.115 Receiving child care subsidies 

alone is not enough for parents to feel 

secure in making ends meet. Multiple 

studies found that parents receiving 

subsidy continue to experience 

substantial financial burden in meeting 

their portion of child care costs.116

Other research shows that higher out-ofpocket child care expenses (which may 

include co-payments) reduce families’ 

child care use and parental (particularly 

maternal) employment.117 Given that 

co-payments have been shown to limit 

parents’ access to child care among 

CCDF-participating families in terms of 

both parents’ ability to afford particular 

child care settings as compared to 

higher-income families (even among 

families eligible to receive CCDF), ACF 

is changing § 98.45 to reduce parent copayments. 

To make child care more affordable to 

families participating in CCDF, we make 

family co-payments above 7 percent of 

family income impermissible because 

they are a barrier to accessing care. The 

revisions also make it easier for Lead 

Agencies to waive co-payments for 

additional families. 

Increase parent choice and strengthen 

and stabilize the child care sector: The 

revisions in this regulation require and 

encourage generally accepted payment 

rates and practices for providers that 

better account for the cost of care, and 

when implemented, would increase 

parent choice in care, support financial 

stability for child care providers that 

currently accept CCDF subsidies, and 

encourage new providers to participate 

in the subsidy system. 

Correcting detrimental payment 

practices is critical for ensuring all 

families have access to high-quality 

child care. This regulation requires Lead 

Agencies to pay providers prospectively 

based on enrollment. To address lack of 

supply for certain types of care for 

populations prioritized in the Act, the 

rule also requires the use of some grants 

and contracts for direct services. 

Additionally, the regulation clarifies 

that Lead Agencies may pay providers 

the full established state payment rate, 

even if the rate is above the private pay 

price to adjust for the cost of care. 

Payments based on enrollment 118 and 

through grants and contracts 119 helped 

providers remain financially stable 

during the peak of the COVID–19 public 

health emergency. The revisions to 

payment practices and higher subsidy 

rates are also linked to higher-quality 

care and increases in the supply of child 

care.120 121 122

Streamline the process to access child 

care subsidies: The revisions in this 

regulation encourage Lead Agencies to 

reduce the burden on families to access 

child care subsidies. Current subsidy 

eligibility determination and enrollment 

processes create administrative burden 

that unnecessarily complicates how 

families access subsidies 123 and how 

fast. 

In the context of child care subsidies, 

administrative burden disrupts initial 


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15408 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 

124Adams, G., & Rohacek, M. (2010). Child care 

instability: Definitions, context, and policy 

implications. Urban Institute. 125 Grobe, D., Weber, R.B., & Davis, E.E. (2008). 

Why do they leave? Child care subsidy use in 

Oregon. Journal of Family and Economic Issues. 126Henly, J. et al. (2015). Determinants of Subsidy 

Stability and Child Care Continuity. Urban 

Institute. 127 Grobe, D., Weber, R. B., & Davis, E.E. (2008). 

Why do they leave? Child care subsidy use in 

Oregon. Journal of Family and Economic Issues. 128U.S. Department of Health and Human 

Services, Office of the Assistant Secretary for 

Planning and Evaluation. 2017. ‘‘Valuing Time in 

U.S. Department of Health and Human Services 

Regulatory Impact Analyses: Conceptual 

Framework and Best Practices.’’ https://aspe.hhs.

gov/reports/valuing-time-us-department-healthhuman-services-regulatory-impact-analysesconceptual-frameworkhttps://aspe.hhs.gov/reports/ 

valuing-time-us-department-health-human-servicesregulatory-impact-analyses-conceptual-framework. 

129U.S. Bureau of Labor Statistics. Employed full 

time: Median usual weekly nominal earnings 

(second quartile): Wage and salary workers: 16 

years and over [LEU0252881500A], retrieved from 

FRED, Federal Reserve Bank of St. Louis; https:// 

fred.stlouisfed.org/series/LEU0252881500A.https://

fred.stlouisfed.org/series/LEU0252881500A. Annual 

Estimate, 2022. 

130Morrissey, T.W. 2017. Child care and parent 

labor force participation: a review of the research 

literature. Review of Economics of the Household 

15, 1–24. https://doi.org/10.1007/s11150-016-9331- 

3; Blau, D., Tekin, E. (2007). The determinants and 

consequences of child care subsidies for single 

mothers in the USA. Journal of Population 

Economics 20, 719–741. https://doi.org/10.1007/ 

s00148-005-0022-2.; Shonkoff, J.P., & Phillips, D.A. 

(Eds.). (2000). From neurons to neighborhoods: The 

science of early childhood development. National 

Academy Press.; Herbst, C. (2017). Universal Child 

Care, Maternal Employment, and Children’s LongRun Outcomes: Evidence from the US Lanham Act 

of 1940. Journal of Labor Economics, 35 (2). https:// 

doi.org/10.1086/689478. 

and continued access to care, both of 

which are detrimental to children’s 

development and families’ employment 

security.124 We see administrative 

burden play out, for example, when 

Lead Agencies assess family eligibility. 

A substantial portion of families who 

lose benefits still meet the criteria for 

participation. Within a few months, 

those same families can demonstrate 

eligibility and return for subsequent 

enrollment.125 Workers with 

unexpected hours or limited control 

over their schedule are significantly 

more likely to lose child care 

subsidies.126 Further, families who 

electively exit the program are three 

times more likely to do so during their 

redetermination month than any other 

time.127 These studies suggest that these 

families missed out on benefits because 

of administrative challenges rather than 

issues with eligibility. 

We were able to quantify the impact 

of the policy to encourage CCDF Lead 

Agencies to implement policies that 

ease the burden of applying for child 

care assistance, including allowing 

online methods of submitting initial 

CCDF applications. This would be a 

benefit to families who would not have 

to take time off from work, job search, 

or other activities to apply for child care 

assistance. To estimate this benefit, we 

used the following factors: 

• Number of Families that would

Benefit: As a baseline for the number of 

families that would be impacted by this 

policy, we assumed that the number of 

families applying every month is equal 

to 5 percent of the current CCDF 

monthly caseload, which means that 

over the course of a year, families equal 

to 60 percent of the current caseload are 

applying for child care. However, many 

more people apply for CCDF than 

receive assistance, so we doubled this 

number, assuming that for every family 

who applies to CCDF and receives 

assistance, there may be another family 

who applies and does not receive 

assistance. 

• Estimated Time Saved: We are

estimating that the online option would 

save families from missing 4 hours of 

time or half of a full day’s work. This 

accounts for the time to actually process 

the application in person and time to 

travel to and from the appointment. 

• Wages: We adopt an hourly value of

time based on after-tax wages to 

quantify the opportunity cost of changes 

in time use for unpaid activities. This 

approach matches the default 

assumptions for valuing changes in time 

use for individuals undertaking 

administrative and other tasks on their 

own time, which are outlined in an 

ASPE report on ‘‘Valuing Time in U.S. 

Department of Health and Human 

Services Regulatory Impact Analyses: 

Conceptual Framework and Best 

Practices.’’ 128 We start with a 

measurement of the usual weekly 

earnings of wage and salary workers of 

$1,059.129 We divide this weekly rate by 

40 hours to calculate an hourly pre-tax 

wage rate of $26.48. We adjust this 

hourly rate downwards by an estimate 

of the effective tax rate for median 

income households of about 17 percent, 

resulting in a post-tax hourly wage rate 

of $21.97. We adopt this as our estimate 

of the hourly value of time when 

calculating benefits associated with this 

impact. If we were to use a fully-loaded 

wage of $37.56/hour, the cost of full 

implementation would be over $30 

million. However, for the accounting 

statement, we use the post-tax hourly 

wage of $21.97. 

Using the above figures and applying 

them to the CCDF caseload, we estimate 

an annualized benefit of $15.3 million 

related to this policy. 

TABLE 5—OPTIONAL POLICIES, BENEFITS

[$ in millions] 

Implementation 

period 

(years 1–2) 

Ongoing annual 

average 

(years 3–5) 

Annualized benefit amount 

(over 5 years) 

Total present value 

(over 5 years) 

Undiscounted 

Discounted 

Undiscounted 

Discounted 

3% 7% 3% 7%

Streamlining the Process to Access 

Child Care Subsidies ......................... $9.6 $19.2 $15.3 $15.1 $14.9 $76.6 $71.4 $65.3 

Total ............................................... 9.6 19.2 15.3 15.1 14.9 76.6 71.4 65.3

Research clearly points to the benefits 

of access to high-quality child care, 

including immediate benefits for 

improved parenting earnings and 

employment.130 In turn, improved 

employment and economic stability at 

home, combined with high-quality 

experiences and nurturing relationships 

in early childhood settings, reduces the 

impact of poverty on children’s health 

and development. Evidence further 

shows the positive effects of highquality child care are especially 

pronounced for families with low 

incomes and families experiencing 

adversity. Therefore, as children and 

families go through periods of challenge 

or transition, timely access to reliable 

and affordable care is especially critical. 

This includes when parents start a new 

job or training program, experience 

changes in earnings or work hours, 

move to a new area, or lose access to an 

existing care arrangement, which some 


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Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 15409 

131Lee, R., Gallo, K., Delaney, S., Hoffman, A., 

Panagari, Y., et al. (2022). Applying for child care 

benefits in the United States: 27 families’ 

experiences. US Digital Response. https://www.

usdigitalresponse.org/projects/applying-for-childcare-benefits-in-the-united-states-27-familiesexperiences. 

132 Deming, David. 2009. ‘‘Early Childhood 

Intervention and Life-Cycle Skill Development: 

Evidence from Head Start.’’ American Economic 

Journal: Applied Economics, 1 (3): 111–34.; 

Duncan, G.J., and Magnuson, K. 2013. ‘‘Investing in 

Preschool Programs.’’ Journal of Economic 

Perspectives, 27 (2): 109–132.; Duncan, G.J., and 

Magnuson, K. 2013. ‘‘Investing in Preschool 

Programs.’’ Journal of Economic Perspectives, 27 

(2): 109–132.; Weiland, C., Yoshikawa, H. 2013. 

‘‘Impacts of a Prekindergarten Program on 

Children’s Mathematics, Language, Literacy, 

Executive Function, and Emotional Skills.’’ Child 

Development, 86(6), 2112–2130.; Heckman, James 

J., and Tim Kautz. ‘‘Fostering and Measuring Skills 

Interventions That Improve Character and 

Cognition.’’ In The Myth of Achievement Tests: The 

GED and the Role of Character in American Life. 

Edited by James J. Heckman, John Eric Humphries, 

and Tim Kautz (eds). University of Chicago Press, 

2014. Chicago Scholarship Online, 2014. https://

doi.org/10.7208/chicago/9780226100128.003.0009. 

families report are the circumstances 

that bring them to first apply for CCDF 

subsidies.131 These are also 

circumstances under which CCDF has 

the potential to substantially impact 

family earnings, economic stability, and 

well-being. 

Improving access to assistance also 

yields benefits in terms of child 

development outcomes for children who 

participate in CCDF as a result of this 

regulation. The provisions in this rule 

improve access and some children who 

might not have received subsidized care 

under the current rule (e.g., those whose 

parents could not pay the co-pay) would 

receive subsidized care under these 

regulations. For these children, they are 

likely to receive higher quality care than 

they otherwise would have. Research 

has demonstrated clear linkages 

between high quality child care and 

positive child outcomes, including 

school readiness, social-emotional 

outcomes, educational attainment, 

employment, and earnings.132

D. Distributional Effects

We considered, as part of our

regulatory impact analysis, whether 

changes would disproportionately 

benefit or harm a particular 

subpopulation. As discussed above, 

benefits accrue both directly and 

indirectly to society. Some of the 

policies included in this regulation are 

at the Lead Agency option, so the 

impacts will be dependent upon (1) if 

the Lead Agency chooses to adopt the 

policy, and (2) how they choose to 

implement the policy given the 

available funding. When examining the 

potential impacts of these policies, there 

are several required policies where 

certain subsets of the population may be 

impacted differently by the policies. 

While the policies will limit the amount 

of family co-payment that CCDF 

families will have to pay, the child care 

providers must still be compensated for 

that amount. That means that the 

burden of those co-payment costs shift 

to the CCDF Lead Agency. Given finite 

funding for CCDF, the increase in 

payments for which Lead Agencies are 

now responsible would mean that there 

are less resources for new CCDF families 

because families that participate in 

CCDF receive higher subsidies for a 

longer period of time and for more 

children. 

Similarly, the requirement to pay 

providers based on a child’s enrollment 

rather than attendance will stabilize 

funding for providers, may increase the 

amount a Lead Agency pays if they were 

not previously paying for absence days 

in the same manner parents without 

child care subsidies by for absence days. 

This creates a transfer in resources from 

the child care provider, who previously 

had to continue running the program 

without funding on days when the child 

was absent, to the Lead Agency. This 

shift in funding could decrease the 

amount of funding allocated by the Lead 

Agency for direct services, and 

therefore, could result in a decrease in 

the number of children served. Based on 

our estimated amount of combined 

required transfers (at full 

implementation; from enrollment-based 

payment, permissible co-payments, 

grants or contracts, and systems 

investments) and the average subsidy 

payment amount, we estimate that the 

transfers for these required policies 

could lead to a reduction in caseload of 

approximately 4,570 children per year, 

or about a third of 1 percent of the FY 

2021 caseload, without additional 

resources. 

For the eligibility policies, we are not 

projecting a direct reduction in 

caseload. This is because for both the 

presumptive eligibility policy and the 

new child eligibility policy, these 

represents transfers from one child to 

another. The result is a shift in which 

child is occupying a CCDF slot, but we 

do not project that these policies would 

lead to a decrease in the number of 

children served. 

For those children who potentially 

would have received subsidies under 

the previous rule, but do not receive 

subsidies under this final rule, it is 

possible that they would receive 

unregulated care which tends to be 

lower quality and less stable. However, 

we expect that, overall, these policies 

will improve quality and stability of 

care for children who continue to 

participate in CCDF. 

While we do not anticipate a direct 

reduction in caseload from the 

eligibility policies themselves, we do 

acknowledge that there will be IT 

systems changes required to implement 

these policies. In response to comments 

received, this version of the RIA now 

includes an estimate of the systemsrelated costs necessary for compliance 

with the final rule. These are upfront 

costs that would be incurred during the 

implementation period, so these 

changes could result in a potential 

reduction in caseload during the first 

two years. Based on the projected costs, 

we estimate that updating systems to 

implement requirements in this rule 

could lead to a reduction in the caseload 

of approximately 1,225 per year for the 

first two years. This caseload reduction 

would not apply in subsequent years. 

The total projected caseload reduction 

per year for the final rule will increase 

at an irregular rate because it 

simultaneously takes into account the 

upfront cost of the systems-related 

changes (which only applies during 

years 1 and 2) and the phased-in impact 

of other requirements during the 

implementation period, which gradually 

increases during years 1 and 2. Using 

the 2-year implementation window, the 

potential caseload reduction is 

represented in Table 6 below. The total 

projected reduction to the caseload 

could be 2,750 in Year 1 and 4,570 in 

year 3. The potential reduction to the 

caseload of 4,570 would remain the 

same in year 3 and beyond because the 

transfers and costs are projected to 

stabilize once the implementation 

window has ended. 

TABLE 6—POTENTIAL ANNUAL CASELOAD REDUCTION IN THE FINAL RULE

Year 1 Year 2 Years 3–5 

Final Rule Requirements (enrollment-based payment,+permissible co-payments+grants/contracts) ....................................................................................................................................... 1,525 3,050 4,570


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TABLE 6—POTENTIAL ANNUAL CASELOAD REDUCTION IN THE FINAL RULE—Continued 

Year 1 Year 2 Years 3–5 

Systems-Related Costs ............................................................................................................... 1,225 1,225 0 

Total ...................................................................................................................................... 2,750 4,275 4,570 

Breakeven Analysis: While we 

acknowledge the costs of updating 

systems, several commenters stated that 

we should also acknowledge the 

potential cost savings of these policies. 

In particular, commenters noted that 

streamlining eligibility processes will 

reduce administrative burden for Lead 

Agencies and therefore offset the 

potential costs. 

In response to these comments, we 

conducted a breakeven analysis to 

determine by how much the Lead 

Agencies’ administrative burden would 

need to be reduced in order to offset the 

projected costs of systems-related IT 

changes. To do this, we used BLS data 

which lists the average salary for 

‘‘Eligibility Interviewers, Government 

Programs’’ as $50,020, which equals 

2,080 labor hours. We then multiplied 

that by two to account for benefits, 

giving us $100,040 per FTE. 

Using a 5-year window, to offset the 

systems cost of $41.1 million which is 

incurred over the first two years ($10.3 

million per year from required policies 

and $10.3 million per year from 

optional policies), Lead Agencies would 

collectively have to save an average of 

$8.2 million per year over the 5 years. 

When distributed across 56 Lead 

Agencies, this comes out to 

approximately $150,000 per Lead 

Agency. This means that if for each 

year, Lead Agencies were able to reduce 

their administrative burden by the 

equivalent 1.5 FTE across the entire 

state or territory, the cost of updating 

systems would be offset by the end of 

the 5-year window. 

E. Analysis of Regulatory Alternatives 

In developing this rule, we considered 

a wide range of policy options before 

settling on these final versions of the 

policies. Among these alternatives, we 

considered: 

• Presumptive eligibility: The policy 

for presumptive eligibility allows for 

Lead Agencies to provide families with 

up to three months of subsidy while the 

family completes the full eligibility 

determination process. In designing this 

policy, we considered a period of two 

months instead of three months. Using 

the same assumptions described above, 

we estimated that two-month 

presumptive eligibility period would be 

a transfer of $13.6 million. When 

compared to the estimated transfer of 

$20.4 million for a three-month 

presumptive eligibility period, we 

determined that the value of the 

additional month of stability and 

continuity of care for families 

outweighed the minimal savings of a 

two-month presumptive eligibility 

period. 

• Not regulating: Another alternative 

would be to not pursue a regulation and 

leave the existing policies as they 

currently stand. For characterization of 

relevant future conditions in the 

absence of regulatory changes, please 

see the ‘‘Baseline’’ section of this 

regulatory impact analysis. 

Accounting Statement (Table of 

Quantified Costs, Including Opportunity 

Costs, Transfers and Benefits): As 

required by OMB Circular A–4, we have 

prepared an accounting statement table 

showing the classification of the 

impacts associated with implementation 

of this final rule. This table includes 

both required and optional policies. 

TABLE 7—QUANTIFIED COSTS, TRANSFERS AND BENEFITS

[$ in millions] 

Implementation 

period 

(year 1–2) 

Ongoing annual 

average 

(years 3–5) 

Annualized cost 

(over 5 years) 

Total present value 

(over 5 years) 

Undiscounted 

Discounted 

Undiscounted 

Discounted 

3% 7% 3% 7% 

Transfers ($ in millions) 

Required Policies: 

Additional Child Eligibility 133 .......... $19.6 $39.2 $31.4 $31.0 $30.5 $156.9 $146.2 $133.7 

Enrollment-based Payment 134 ...... 8.3 16.5 13.2 13.1 12.9 66.2 61.6 56.4 

Permissible Co-payments 135 ......... 7.9 15.7 12.6 12.4 12.2 62.9 58.6 53.6 

Transfers Subtotal (Required Policies) ............................................ 35.7 71.5 57.2 56.5 55.5 285.9 266.4 243.7 

Optional Policies: 

Presumptive Eligibility 136 ............... 10.2 20.4 16.4 16.2 15.9 81.8 76.2 69.7 

Paying Established Payment 

Rate 137 ....................................... 78.7 157.4 126.0 124.4 122.3 629.8 586.8 536.7 

Waiving Co-payments for Additional Populations 138 .................. 4.5 8.9 7.1 7.1 6.9 35.7 33.3 30.4 

Transfers Subtotal (Optional Policies) .. 93.4 186.8 149.4 147.6 145.2 747.2 696.2 636.8 

Total Transfers ........................ 129.1 258.3 206.6 204.1 200.7 1,033.2 962.6 880.5 

Costs ($ in millions) 

Required Policies: 

Grants and Contracts ..................... 3.1 6.1 4.9 4.8 4.8 24.5 22.8 20.9 

Systems ......................................... 10.3 0 4.1 4.3 4.5 20.6 20.3 19.9 

Costs Subtotal (Required Policies) 13.3 6.1 9.0 9.1 9.3 45.0 43.1 40.7 

Optional Policies: 

Systems ......................................... 10.3 0 4.1 4.3 4.5 20.6 20.3 19.9 

Costs Subtotal (Optional Policies) 10.3 0 4.1 4.3 4.5 20.6 20.3 19.9 


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133Transfer from families applying to enter the 

CCDF program to families that already have 

children receiving CCDF assistance. 

134Transfer to some combination of child care 

providers and CCDF families from some 

combination of other CCDF families and CCDF Lead 

Agencies. 

135Transfer to CCDF families from some 

combination of other CCDF families and CCDF Lead 

Agencies. 

136Transfer from CCDF-eligible families to nonCCDF eligible families. 

137Transfer to some combination of child care 

providers and CCDF families from some 

combination of other CCDF families and CCDF Lead 

Agencies. 

138Transfer to CCDF families from some 

combination of other CCDF families and CCDF Lead 

Agencies. 

139U.S. Department of the Treasury. (September 

2021). The Economics of Child Care Supply in the 

United States. https://home.treasury.gov/system/ 

files/136/The-Economics-of-Childcare-Supply-09- 

14-final.pdf. 

TABLE 7—QUANTIFIED COSTS, TRANSFERS AND BENEFITS—Continued 

[$ in millions] 

Implementation 

period 

(year 1–2) 

Ongoing annual 

average 

(years 3–5) 

Annualized cost 

(over 5 years) 

Total present value 

(over 5 years) 

Undiscounted 

Discounted 

Undiscounted 

Discounted 

3% 7% 3% 7% 

Total Costs .............................. 23.6 6.1 13.1 13.4 13.8 65.6 63.3 60.6 

Benefits ($ in millions) 

Optional Policies: 

Streamlining the Process to Access Child Care Subsidies ......... 9.6 19.2 15.3 15.1 14.9 76.6 71.4 65.3 

Benefits Subtotal (Optional Policies) ............................................ 9.6 19.2 15.3 15.1 14.9 76.6 71.4 65.3 

Total Benefits .......................... 9.6 19.2 15.3 15.1 14.9 76.6 71.4 65.3 

F. Impact of Final Rule 

Based on the calculations in this RIA, 

we estimate the quantified impact of the 

required policies in the final rule to be 

an annualized amount of $57.2 million 

in transfers and $9.0 million in costs. 

We estimate the quantified impact of 

the optional policies in the final rule to 

be an annualized amount of $149.4 

million in transfers, $4.1 million in 

costs, and $15.3 million in benefits. 

When we combine the projections for 

required and optional policies, the 

annualized totals are $206.6 million in 

transfers, $13.1 million in costs, and 

$15.3 million in benefits. 

However, the RIA only quantifies the 

estimated impact of the final rule on the 

Lead Agencies, parents, and child care 

providers that interact with the CCDF 

program, which is only a small portion 

of the child care market. Whether a 

family can access and afford child care 

has far reaching impacts on labor market 

participation and potential earnings, 

which then affects businesses’ ability to 

recruit and retain a qualified workforce, 

affecting overall economic growth.139

IX. Tribal Consultation Statement 

Executive Order 13175, Consultation 

and Coordination with Indian Tribal 

Governments, requires agencies to 

consult with Indian Tribes when 

regulations have substantial direct 

effects on one or more Indian tribes, on 

the relationship between the federal 

government and Indian tribes, or on the 

distribution of power and 

responsibilities between the federal 

government and Indian tribes. The 

discussion in subpart I in section V of 

the preamble serves as the Tribal impact 

statement and contains a detailed 

description of the consultation and 

outreach in this final rule. 

Jeff Hild, Acting Assistant Secretary of 

the Administration for Children and 

Families, approved this document on 

February 8, 2024. 

(Catalog of Federal Domestic Assistance 

Program Number 93.575, Child Care and 

Development Block Grant; 93.596, Child Care 

Mandatory and Matching Funds) 

List of Subjects in 45 CFR Part 98 

Child care, Grant programs–social 

programs. 

Xavier Becerra, 

Secretary, Department of Health and Human 

Services. 

For the reasons set forth in the 

preamble, we amend 45 CFR part 98 as 

follows: 

PART 98—CHILD CARE AND 

DEVELOPMENT FUND 

■ 1. The authority citation for part 98 is 

revised to read: 

Authority: 42 U.S.C. 618, 9858, 

■ 2. Amend § 98.2 by: 

■ a. Revising the definitions of Major 

renovation and State; 

■ b. Adding, in alphabetical order, the 

definitions of Territory and Territory 

mandatory funds; and 

■ c. Revising the definition of Tribal 

mandatory funds. 

The revisions and additions read as 

follows: 

§ 98.2 Definitions. 

* * * * * 

Major renovation means any 

renovation that has a cost equal to or 

exceeding $350,000 in CCDF funds for 

child care centers and $50,000 in CCDF 

funds for family child care homes, 

which amount shall be adjusted 

annually for inflation and published on 

the Office of Child Care website. If 

renovation costs exceed these 

thresholds and do not include: 

(1) Structural changes to the 

foundation, roof, floor, exterior or loadbearing walls of a facility, or the 

extension of a facility to increase its 

floor area; or 

(2) Extensive alteration of a facility 

such as to significantly change its 

function and purpose for direct child 

care services, even if such renovation 

does not include any structural change; 

and improve the health, safety, and/or 

quality of child care, then it shall not be 

considered major renovation; 

* * * * * 

State means any of the States and the 

District of Columbia, and includes 

Territories and Tribes unless otherwise 

specified; 

* * * * * 

Territory means the Commonwealth 

of Puerto Rico, the United States Virgin 

Islands, Guam, American Samoa, and 

the Commonwealth of the Northern 

Marianas Islands; 

Territory mandatory funds means the 

child care funds set aside at section 

418(a)(3)(C) of the Social Security Act 

(42 U.S.C. 618(a)(3)(C)) for payments to 

the Territories; 

Tribal mandatory funds means the 

child care funds set aside at section 

418(a)(3)(B) of the Social Security Act 


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(42 U.S.C. 618(a)(3)(B)) for payments to 

Indian Tribes and tribal organizations; 

* * * * * 

■ 3. Amend § 98.13 by revising 

paragraph (b)(4) to read as follows: 

§ 98.13 Applying for Funds. 

* * * * * 

(b) * * * 

(4) A certification that no principals 

have been debarred pursuant to 2 CFR 

180.300; 

* * * * * 

■ 4. Amend § 98.15 by revising 

paragraphs (a)(8) and (b)(12) to read as 

follows: 

§ 98.15 Assurances and certifications. 

* * * * * 

(a) * * * 

(8) To the extent practicable, 

enrollment and eligibility policies 

support the fixed costs of providing 

child care services by delinking 

provider payment rates from an eligible 

child’s occasional absences in 

accordance with § 98.45(m); 

* * * * * 

(b) * * * 

(12) Payment practices of child care 

providers of services for which 

assistance is provided under the CCDF 

reflect generally accepted payment 

practices of child care providers that 

serve children who do not receive CCDF 

assistance, pursuant to § 98.45(m); and 

* * * * * 

■ 5. Amend § 98.16 by: 

■ a. Revising and republishing 

paragraph (h) and revising paragraph 

(k); 

■ b. Redesignating paragraphs (x) 

through (ii) as paragraphs (bb) through 

(ll); 

■ c. Adding new paragraphs (x) through 

(aa); and 

■ d. Revising newly redesignated 

paragraphs (ee) and (ff). 

The revisions and additions read as 

follows: 

§ 98.16 Plan provisions. 

* * * * * 

(h) A description and demonstration 

of eligibility determination and 

redetermination processes to promote 

continuity of care for children and 

stability for families receiving CCDF 

services, including: 

(1) An eligibility redetermination 

period of no less than 12 months in 

accordance with § 98.21(a); 

(2) A graduated phase-out for families 

whose income exceeds the Lead 

Agency’s threshold to initially qualify 

for CCDF assistance, but does not 

exceed 85 percent of State median 

income, pursuant to § 98.21(b); 

(3) Processes that take into account 

irregular fluctuation in earnings, 

pursuant to § 98.21(c); 

(4) Processes to incorporate additional 

eligible children in the family size in 

accordance with § 98.21(d); 

(5) Procedures and policies for 

presumptive eligibility in accordance 

with § 98.21(e), including procedures 

for tracking the number of 

presumptively eligible children; 

(6) Procedures and policies to ensure 

that parents are not required to unduly 

disrupt their education, training, or 

employment to complete initial 

eligibility determination or redetermination, pursuant to § 98.21(f); 

(7) Processes for using eligibility for 

other programs to verify eligibility for 

CCDF in accordance with § 98.21(g); 

(8) Limiting any requirements to 

report changes in circumstances in 

accordance with § 98.21(h); 

(9) Policies that take into account 

children’s development and learning 

when authorizing child care services 

pursuant to § 98.21(i); and, 

(10) Other policies and practices such 

as timely eligibility determination and 

processing of applications; 

* * * * * 

(k) A description of the sliding fee 

scale(s) (including any factors other 

than income and family size used in 

establishing the fee scale(s)) that 

provide(s) for cost-sharing by the 

families that receive child care services 

for which assistance is provided under 

the CCDF and how co-payments are 

affordable for families, pursuant to 

§ 98.45(l). This shall include a 

description of the criteria established by 

the Lead Agency, if any, for waiving 

contributions for families; 

* * * * * 

(x) A description of the supply of 

child care available regardless of 

subsidy participation relative to the 

population of children requiring child 

care, including care for infants and 

toddlers, children with disabilities as 

defined by the Lead Agency, children 

who receive care during nontraditional 

hours, and children in underserved 

geographic areas, including the data 

sources used to identify shortages in the 

supply of child care providers. 

(y) A description of the Lead Agency’s 

strategies and the actions it will take to 

address the supply shortages identified 

in paragraph (x) of this section and 

improve parent choice specifically for 

families eligible to participate in CCDF, 

including: 

(1) For families needing care during 

nontraditional hours, which may 

include strategies such as higher 

payment rates, engaging with homebased child care networks, partnering 

with employers that have employees 

working nontraditional hours, and 

grants or contracts for direct services; 

(2) For families needing infant and 

toddler care, which must include grants 

or contracts for direct services pursuant 

to § 98.30(b) and described further in 

paragraph (z) of this section and may 

include additional strategies such as 

enhanced payment rates, training and 

professional development opportunities 

for the child care workforce, and 

engaging with staffed family child care 

networks and/or child care provider 

membership organizations; 

(3) For families needing care for 

children with disabilities, which must 

include grants or contracts for direct 

services pursuant to § 98.30(b) and 

described further in paragraph (z) of this 

section and may include additional 

strategies such as enhanced payment 

rates, training and professional 

development opportunities for the child 

care workforce, and engaging with 

staffed family child care networks and/ 

or child care provider membership 

organizations; 

(4) For families in underserved 

geographic areas, which must include 

grants and contracts for direct services 

pursuant to § 98.30(b) and described 

further in paragraph (z) of this section 

and may include additional strategies 

such as enhanced payment rates, 

training and professional development 

opportunities for the child care 

workforce, and engaging with staffed 

family child care networks and/or child 

care provider membership 

organizations; and, 

(5) A method of tracking progress 

toward goals to increase supply and 

support equal access and parental 

choice. 

(z) A description of how the Lead 

Agency will use grants or contracts for 

direct services to achieve supply 

building goals for children in 

underserved geographic areas, infants 

and toddlers, children with disabilities 

as defined by the Lead Agency, and, at 

Lead Agency option, children who 

receive care during nontraditional 

hours. This must include a description 

of the proportion of the shortages for 

these groups would be filled by 

contracted or grant funded slots Lead 

Agencies must continue to provide 

CCDF families the option to choose a 

certificate for the purposes of acquiring 

care. 

(aa) A description of how the Lead 

Agency will improve the quality of 

child care services for children in 

underserved geographic areas, infants 

and toddlers, children with disabilities 

as defined by the Lead Agency, and 


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children who receive care during 

nontraditional hours. 

* * * * * 

(ee) A description of generally 

accepted payment practices applicable 

to providers of child care services for 

which assistance is provided under this 

part, pursuant to § 98.45(m), including 

practices to ensure timely payment for 

services, to delink provider payments 

from children’s occasional absences to 

the extent practicable, cover mandatory 

fees, and pay based on a full or parttime basis; 

(ff) A description of internal controls 

to ensure integrity and accountability, 

processes in place to investigate and 

recover fraudulent payments and to 

impose sanctions on clients or providers 

in response to fraud, and procedures in 

place to document and verify eligibility, 

pursuant to § 98.68; 

* * * * * 

■ 6. Amend § 98.19 by revising the 

section heading and paragraphs (b)(1) 

and (f) to read as follows: 

§ 98.19 Requests for Temporary Waivers 

* * * * * 

(b) Types. Types of waivers include: 

(1) Transitional and legislative 

waivers. Lead Agencies may apply for 

temporary waivers meeting the 

requirements described in paragraph (a) 

of this section that would provide 

transitional relief from conflicting or 

duplicative requirements preventing 

implementation, or an extended period 

of time in order for a State, territorial or 

tribal legislature to enact legislation to 

implement the provisions of this 

subchapter. Such waivers are: 

(i) Limited to a two-year period; 

(ii) May not be extended, 

notwithstanding paragraph (f) of this 

section; 

(iii) Are designed to provide States, 

Territories and Tribes at most one full 

legislative session to enact legislation to 

implement the provisions of the Act or 

this part, and; 

(iv) Are conditional, dependent on 

progress towards implementation, and 

may be terminated by the Secretary at 

any time in accordance with paragraph 

(e) of this section. 

* * * * * 

(f) Renewal. Where permitted, the 

Secretary may approve or disapprove a 

request from a State, Territory or Tribe 

for renewal of an existing waiver under 

the Act or this section for a period no 

longer than one year. A State, Territory 

or Tribe seeking to renew their waiver 

approval must inform the Secretary of 

this intent no later than 30 days prior to 

the expiration date of the waiver. The 

State, Territory or Tribe shall re-certify 

in its extension request the provisions 

in paragraph (a) of this section, and 

shall also explain the need for 

additional time of relief from such 

sanction(s) or provisions. 

* * * * * 

■ 7. Amend § 98.21 by: 

■ a. Revising paragraph (a)(2)(iii); 

■ b. Redesignating paragraphs (d) 

through (g) as paragraphs (h) through 

(k); and 

■ c. Adding new paragraphs (d) through 

(g). 

The revisions and additions read as 

follows: 

§ 98.21 Eligibility determination 

processes. 

(a) * * * 

(2) * * * 

(iii) If a Lead Agency chooses to 

initially qualify a family for CCDF 

assistance based on a parent’s status of 

seeking employment or engaging in job 

search, the Lead Agency has the option 

to end assistance after a minimum of 

three months if the parent has still not 

found employment, although assistance 

must continue if the parent becomes 

employed during the job search period. 

* * * * * 

(d) The Lead Agency shall establish 

policies and processes to incorporate 

additional eligible children in the 

family size (e.g., siblings or foster 

siblings), including ensuring a 

minimum of 12 months of eligibility 

between eligibility determination and 

redetermination as described in 

paragraph (a) of this section for children 

previously determined eligible and for 

new children who are determined 

eligible, without placing undue 

reporting burden on families. 

(e) At a Lead Agency’s option, a child 

may be considered presumptively 

eligible for up to three months and 

begin to receive child care subsidy prior 

to full documentation and eligibility 

determination: 

(1) The Lead Agency may issue 

presumptive eligibility prior to full 

documentation of a child’s eligibility if 

the Lead Agency first obtains a less 

burdensome minimum verification 

requirement from the family. 

(2) If, after full documentation is 

provided, a child is determined to be 

ineligible, the Lead Agency shall ensure 

that a child care provider is paid and 

shall not recover funds paid or owed to 

a child care provider for services 

provided as a result of the presumptive 

eligibility determination except in cases 

of fraud or intentional program violation 

by the provider. 

(3) Any CCDF payment made on 

behalf of a presumptively eligible child 

prior to the final eligibility 

determination shall not be considered 

an error or improper payment under 

subpart K of this part and will not be 

subject to disallowance so long as the 

payment was not for a service period 

longer than the period of presumptive 

eligibility. 

(4) If a child is determined to be 

eligible, the period of presumptive 

eligibility will apply to the minimum of 

12 months of eligibility prior to redetermination described in paragraph 

(a) of this section. 

(5) The Secretary may deny the use of 

federal funds for direct services under 

presumptive eligibility for Lead 

Agencies under a corrective action plan 

for error rate reporting pursuant to 

§ 98.102(c). 

(f) The Lead Agency shall establish 

procedures and policies to ensure 

parents, especially parents receiving 

assistance through the Temporary 

Assistance for Needy Families (TANF) 

program are not required to unduly 

disrupt their education, training, or 

employment in order to complete the 

eligibility determination or redetermination process, including the 

use of online applications and other 

measures, to the extent practicable. 

(g) At the Lead Agency’s option, 

enrollment in other benefit programs or 

documents or verification used for other 

benefit programs may be used to verify 

eligibility as appropriate according to 

§ 98.68(c) for CCDF, such as: 

(1) Benefit programs with income 

eligibility requirements aligned with the 

income eligibility at § 98.20(a)(2)(i) may 

be used to verify a family’s income 

eligibility; and 

(2) Benefit programs with other 

eligibility requirements aligned with 

§ 98.20(a)(3) may verify: 

(i) A family’s work or attendance at a 

job training or educational program; 

(ii) A family’s status as receiving, or 

need to receive, protective services; or 

(iii) Other information needed for 

eligibility. 

* * * * * 

■ 8. Amend § 98.30 by revising 

paragraph (b) to read as follows: 

§ 98.30 Parental choice. 

* * * * * 

(b)(1) Lead Agencies shall increase 

parent choice by providing some 

portion of the delivery of direct services 

via grants or contracts, including at a 

minimum for children in underserved 

geographic areas, infants and toddlers, 

and children with disabilities. 

(2) When a parent elects to enroll the 

child with a provider that has a grant or 

contract for the provision of child care 


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services, the child will be enrolled with 

the provider selected by the parent to 

the maximum extent practicable. 

* * * * * 

■ 9. Amend § 98.33 by: 

■ a. Redesignating paragraphs (a)(4)(ii) 

through (a)(4)(iv) as (iii) through (v) and 

adding a new paragraph (a)(4)(ii); 

■ c. Revising (a)(5); and, 

■ d. Adding paragraph (a)(8). 

The revision and additions read as 

follows: 

§ 98.33 Consumer and provider education. 

* * * * * 

(a) * * * 

(4) * * * 

(ii) Areas of compliance and noncompliance; 

* * * * * 

(5) Aggregate data for each year for 

eligible providers including: 

(i) Number of deaths (for each 

provider category and licensing status); 

(ii) Number of serious injuries (for 

each provider category and licensing 

status); 

(iii) Instances of substantiated child 

abuse that occurred in child care 

settings; and, 

(iv) Total number of children in care 

(for each provider category and 

licensing status). 

* * * * * 

(8) The sliding fee scale for parent copayments pursuant to § 98.45(l), 

including the co-payment amount a 

family may expect to pay and policies 

for waiving co-payments. 

* * * * * 

■ 10. Amend § 98.43 by revising 

paragraphs (a)(1)(i), (c)(1) introductory 

text, (c)(1)(v), (d)(3)(i) introductory text, 

and (d)(4) to read as follows: 

§ 98.43 Criminal background checks. 

(a)(1) * * * 

(i) Requirements, policies, and 

procedures to require and conduct 

background checks, and make a 

determination of eligibility for child 

care staff members (including 

prospective child care staff members) of 

all licensed, regulated, or registered 

child care providers and all child care 

providers eligible to deliver services for 

which assistance is provided under this 

part as described in paragraph (a)(2) of 

this section; 

* * * * * 

(c)(1) The State, Territory, or Tribe in 

coordination with the Lead Agency 

shall find a child care staff member 

ineligible for employment for services 

for which assistance is made available 

in accordance with this part, if such 

individual: 

* * * * * 

(v) Has been convicted of a violent 

misdemeanor committed as an adult 

against a child, including the following 

crimes: child abuse, child 

endangerment, and sexual assault, or of 

any misdemeanor involving child 

pornography. 

* * * * * 

(d) * * * 

(3) * * * 

(i) The staff member received 

qualifying results from a background 

check described in paragraph (b) of this 

section; 

* * * * * 

(4) A prospective staff member may 

begin work for a child care provider 

described in paragraph (a)(2)(i) of this 

section after receiving qualifying results 

for either the check described at 

paragraph (b)(1) or (b)(3)(i) of this 

section in the State where the 

prospective staff member resides. 

Pending completion of all background 

check components in paragraph (b) of 

this section, the staff member must be 

supervised at all times by an individual 

who received a qualifying result on a 

background check described in 

paragraph (b) of this section within the 

past five years. 

* * * * * 

■ 11. Amend § 98.45 by: 

■ a. Revising paragraphs (b)(5) and (6) 

and (d)(2)(ii); 

■ b. Revising paragraphs (f)(1)(ii)(B) and 

(iii); 

■ c. Adding new paragraph (f)(1)(iv); 

■ d. Redesignating paragraphs (g) 

through (l) as paragraphs (h) through 

(m); 

■ e. Adding a new paragraph (g); 

■ f. Revising newly redesignated 

paragraphs (l)(3) and (4) and (m); and, 

■ g. Adding a new paragraph (n). 

The revisions and additions read as 

follows: 

§ 98.45 Equal access. 

* * * * * 

(b) * * * 

(5) How co-payments based on a 

sliding fee scale are affordable and do 

not exceed 7 percent of income for all 

families, as stipulated at paragraph (l) of 

this section; if applicable, a rationale for 

the Lead Agency’s policy on whether 

child care providers may charge 

additional amounts to families above 

the required family co-payment, 

including a demonstration that the 

policy promotes affordability and 

access; analysis of the interaction 

between any such additional amounts 

with the required family co-payments, 

and of the ability of subsidy payment 

rates to provide access to care without 

additional fees; and data on the extent 

to which CCDF providers charge such 

additional amounts (based on 

information obtained in accordance 

with paragraph (d)(2) of this section); 

(6) How the Lead Agency’s payment 

practices support equal access to a range 

of providers by providing stability of 

funding and encouraging more child 

care providers to serve children 

receiving CCDF subsidies, in accordance 

with paragraph (m) of this section; 

* * * * * 

(d) * * * 

(2) * * * 

(ii) CCDF child care providers charge 

amounts to families more than the 

required family co-payment (under 

paragraph (l) of this section) in 

instances where the provider’s price 

exceeds the subsidy payment, including 

data on the size and frequency of any 

such amounts. 

* * * * * 

(f) * * * 

(1) * * * 

(ii) * * * 

(B) Higher-quality care, as defined by 

the Lead Agency using a quality rating 

and improvement system or other 

system of quality indicators, at each 

level; 

(iii) The Lead Agency’s response to 

stakeholder views and comments; and, 

(iv) The data and summary required at 

paragraph (d)(2)(ii) of this section. 

* * * * * 

(g) To facilitate parent choice, 

increase program quality, build supply, 

and better reflect the cost of providing 

care, it is permissible for a Lead Agency 

to pay an eligible child care provider the 

Lead Agency’s established payment rate 

at paragraph (a) of this section, which 

may be more than the price charged to 

children not receiving CCDF subsidies. 

* * * * * 

(l) * * * 

(3) Provides for affordable family copayments that are not a barrier to 

families receiving assistance under this 

part, not to exceed 7 percent of income 

for all families, regardless of the number 

of children in care who may be 

receiving CCDF assistance; and 

(4) At Lead Agency discretion, allows 

for co-payments to be waived for 

families whose incomes are at or below 

150 percent of the poverty level for a 

family of the same size, that have 

children who are in foster or kinship 

care or otherwise receive or need to 

receive protective services, that are 

experiencing homelessness, that have 

children who have a disability as 

defined at § 98.2, that are enrolled in 

Head Start or Early Head Start (42 

U.S.C. 9831 et seq.), or that meet other 

criteria established by the Lead Agency. 


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(m) The Lead Agency shall 

demonstrate in the Plan that it has 

established payment practices 

applicable to all CCDF child care 

providers that reflect generally accepted 

payment practices of child care 

providers that serve children who do 

not receive CCDF subsidies, which must 

include (unless the Lead Agency can 

demonstrate that such practices are not 

generally-accepted for a type of child 

care setting): 

(1) Ensure timeliness of payment to 

child care providers by paying in 

advance of or at the beginning of the 

delivery of child care services to 

children receiving assistance under this 

part; 

(2) Support the fixed costs of 

providing child care services by 

delinking provider payments from a 

child’s occasional absences by: 

(i) Basing payment on a child’s 

authorized enrollment; or, 

(ii) An alternative approach for which 

the Lead Agency provides a justification 

in its Plan that the requirements at 

paragraph (m)(2)(i) of this section are 

not practicable, including evidence that 

the alternative approach will not 

undermine the stability of child care 

programs. 

(3) Pay providers on a part-time or 

full-time basis (rather than paying for 

hours of service or smaller increments 

of time); and 

(4) Pay for reasonable mandatory 

registration fees that the provider 

charges to private-paying parents. 

(n) The Lead Agency shall 

demonstrate in the Plan that it has 

established payment practices 

applicable to all CCDF providers that: 

(1) Ensure child care providers 

receive payment for any services in 

accordance with a written payment 

agreement or authorization for services 

that includes, at a minimum, 

information regarding payment policies, 

including rates, schedules, any fees 

charged to providers, and the dispute 

resolution process required by 

paragraph (n)(3); 

(2) Ensure child care providers 

receive prompt notice of changes to a 

family’s eligibility status that may 

impact payment, and that such notice is 

sent to providers no later than the day 

the Lead Agency becomes aware that 

such a change will occur; 

(3) Include timely appeal and 

resolution processes for any payment 

inaccuracies and disputes; 

(4) May include taking precautionary 

measures when a provider is suspected 

of fiscal mismanagement; and 

(5) Ensure the total payment received 

by CCDF child care providers is not 

reduced by the determination of 

affordable family co-payment as 

described in the sliding fee scale at 

§ 98.45(l). 

■ 12. Amend § 98.50 by: 

■ a. Revising paragraphs (a)(3) and (b)(1) 

and (2); 

■ b. Adding paragraph (b)(4); and 

■ c. Revising paragraph (e) introductory 

text. 

The revisions and addition read as 

follows: 

§ 98.50 Child care services. 

(a) * * * 

(3) Using funding methods provided 

for in § 98.30 including grants or 

contracts for slots for children in 

underserved geographic areas, for 

infants and toddlers, and children with 

disabilities. Grants solely to improve the 

quality of child care services like those 

in (b) of this section would not satisfy 

the requirements at § 98.30(b); and 

* * * * * 

(b) * * * 

(1) No less than nine percent shall be 

used for activities designed to improve 

the quality of child care services and 

increase parental options for, and access 

to, high-quality child care as described 

at § 98.53; and 

(2) No less than three percent shall be 

used to carry out activities at 

§ 98.53(a)(4) as such activities relate to 

the quality of care for infants and 

toddlers. 

* * * * * 

(4) Amounts reserved pursuant to this 

subsection may not be used to satisfy 

requirements at § 98.30(b). 

* * * * * 

(e) Not less than 70 percent of the 

State and Territory Mandatory and 

Federal and State share of State 

Matching Funds shall be used to meet 

the child care needs of families who: 

* * * * * 

■ 13. Amend § 98.53 by redesignating 

(b) through (f) as (c) through (g) and 

adding a new paragraph (b) to read as 

follows: 

§ 98.53 Activities to improve the quality of 

child care. 

* * * * * 

(b) Lead Agencies are strongly 

encouraged to engage families and 

providers with direct experience in the 

child care subsidy system to improve 

the quality of child care and child care 

subsidy policy. Lead Agencies may 

expend quality funds to support such 

engagement including: 

(1) Planning and implementing an 

engagement strategy to solicit and 

implement feedback from families, child 

care providers, and staff who have 

direct experience with the child care 

subsidy program and/or quality 

improvement activities; 

(2) Compensating participating 

parents, child care providers, and child 

care staff for their time and for expenses 

incurred as a result of their participation 

(i.e. transportation, child care); and 

(3) Hiring parents, child care 

providers, or child care staff to serve as 

subject matter experts in the 

development or refinement of subsidy 

policy and quality initiatives. 

* * * * * 

■ 14. Amend § 98.60 by: 

■ a. Revising and republishing 

paragraph (a); 

■ b. Redesignating paragraphs (d)(3) 

through (d)(8) to (d)(4) through (d)(9); 

and 

■ c. Adding a new paragraph (d)(3). 

The revisions and additions read as 

follows: 

§ 98.60 Availability of funds. 

(a) The CCDF is available, subject to 

the availability of appropriations, in 

accordance with the apportionment of 

funds from the Office of Management 

and Budget as follows: 

(1) Discretionary Funds are available 

to States, Territories, and Tribes; 

(2) State Mandatory and Matching 

Funds are available to States; 

(3) Territory Mandatory Funds are 

available to Territories; and 

(4) Tribal Mandatory Funds are 

available to Tribes. 

* * * * * 

(d) * * * 

(3) Mandatory Funds for Territories 

shall be obligated in the fiscal year in 

which funds are granted and liquidated 

no later than the end of the succeeding 

fiscal year. 

* * * * * 

■ 15. Amend § 98.62 by revising 

paragraphs (a) introductory text and (b) 

introductory text and adding paragraph 

(d) to read as follows: 

§ 98.62 Allotments from the Mandatory 

Fund. 

(a) Each of the 50 States and the 

District of Columbia will be allocated 

from the funds appropriated under 

section 418(a)(3)(A) of the Social 

Security Act, less the amounts reserved 

for technical assistance pursuant to 

§ 98.60(b)(1) an amount of funds equal 

to the greater of: 

* * * * * 

(b) For Indian Tribes and tribal 

organizations will be allocated from the 

funds appropriated under section 

418(a)(3)(B) of the Social Security Act 

shall be allocated according to the 

formula at paragraph (c) of this section. 

In Alaska, only the following 13 entities 


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shall receive allocations under this 

subpart, in accordance with the formula 

at paragraph (c) of this section: 

* * * * * 

(d) The Territories will be allocated 

from the funds appropriated under 

section 418(a)(3)(C) of the Social 

Security Act based upon the following 

factors: 

(1) A Young Child factor—the ratio of 

the number of children in the Territory 

under five years of age to the number of 

such children in all Territories; and 

(2) An Allotment Proportion factor— 

determined by dividing the per capita 

income of all individuals in all the 

Territories by the per capita income of 

all individuals in the Territory. 

(i) Per capita income shall be: 

(A) Equal to the average of the annual 

per capita incomes for the most recent 

period of three consecutive years for 

which satisfactory data are available at 

the time such determination is made; 

and 

(B) Determined every two years. 

(ii) [Reserved] 

■ 16. Amend § 98.64 by revising 

paragraph (a) and adding paragraph (e) 

to read as follows: 

§ 98.64 Reallotment and redistribution of 

funds. 

(a) According to the provisions of this 

section State and Tribal Discretionary 

Funds are subject to reallotment, and 

State Matching Funds and Territory 

Mandatory Funds are subject to 

redistribution. State funds are reallotted 

or redistributed only to States as defined 

for the original allocation. Tribal funds 

are reallotted only to Tribes. Mandatory 

Funds granted to Territories are 

redistributed only to Territories. 

Discretionary Funds granted to the 

Territories are not subject to 

reallotment. Any Discretionary funds 

granted to the Territories that are 

returned after they have been allotted 

will revert to the Federal Government. 

* * * * * 

(e)(1) Any portion of the Mandatory 

Funds that are not obligated in the 

period for which the grant is made shall 

be redistributed. Territory Mandatory 

Funds, if any, will be redistributed on 

the request of, and only to, those other 

Territories that have obligated their 

entire Territory Mandatory Fund 

allocation in full for the period for 

which the grant was first made. 

(2) The amount of Mandatory Funds 

granted to a Territory that will be made 

available for redistribution will be based 

on the Territory’s financial report to 

ACF for the Child Care and 

Development Fund (ACF–696) and is 

subject to the monetary limits at 

paragraph (b)(2) of this section. 

(3) A Territory eligible to receive 

redistributed Mandatory Funds shall 

also use the ACF–696 to request its 

share of the redistributed funds, if any. 

(4) A Territory’s share of redistributed 

Mandatory Funds is based on the same 

ratio as § 98.62(d). 

(5) Redistributed funds are considered 

part of the grant for the fiscal year in 

which the redistribution occurs. 

■ 17. Amend § 98.65 by revising 

paragraph (h)(3) to read as follows: 

§ 98.65 Audits and financial reporting 

* * * * * 

(h) * * * 

(3) Direct services for both grant or 

contracted slots and certificates; * * * 

* * * * * 

■ 18. Amend § 98.71 by; 

■ a. Removing paragraph (a)(11); 

■ b. Redesignating paragraphs (b)(5) and 

(6) as (b)(6) and (7); and 

■ c. Adding a new paragraph (b)(5). 

The addition reads as follows: 

§ 98.71 Content of reports. 

(b) * * * 

(5) For Lead Agencies implementing 

presumptive eligibility in accordance 

with § 98.21(e): 

(i) The number of presumptively 

eligible children ultimately determined 

fully eligible; 

(ii) The number of presumptively 

eligible children for whom the family 

does not complete the documentation 

for full eligibility verification; and, 

(iii) The number of presumptively 

eligible children who are determined 

not to be eligible after full verification; 

* * * * * 

■ 19. Amend § 98.81 by revising 

paragraphs (b)(6)(vii) through (ix) and 

adding paragraphs (b)(6)(x) through (xii) 

to read as follows: 

§ 98.81 Application and Plan procedures. 

* * * * * 

(b) * * * 

(6) * * * 

(vii) The description of the sliding fee 

scale at § 98.16(k); 

(viii) The description of the market 

rate survey or alternative methodology 

at § 98.16(r); 

(ix) The description relating to 

Matching Funds at § 98.16(w); 

(x) The description of how the Lead 

Agency uses grants or contracts for 

supply building at § 98.16(z); 

(xi) The description of how the Lead 

Agency prioritizes increasing access to 

high-quality child care in areas with 

high concentration of poverty at 

§ 98.16(aa); and 

(xii) The description of provider 

payment practices at § 98.16(ee). 

* * * * * 

■ 20. Amend § 98.83 by revising and 

publishing paragraph (d)(1) and revising 

paragraphs (g) introductory text and 

(g)(1) and (2) to read as follows: 

§ 98.83 Requirements for tribal programs. 

* * * * * 

(d)(1) Tribal Lead Agencies shall not 

be subject to: 

(i) The requirements to use grants or 

contracts to build supply for certain 

populations at § 98.30(b); 

(ii) The requirement to produce a 

consumer education website at 

§ 98.33(a). Tribal Lead Agencies still 

must collect and disseminate the 

provider-specific consumer education 

information described at § 98.33(a) 

through (d), but may do so using 

methods other than a website; 

(iii) The requirement to have licensing 

applicable to child care services at 

§ 98.40; 

(iv) The requirement for a training 

and professional development 

framework at § 98.44(a); 

(v) The market rate survey or 

alternative methodology described at 

§ 98.45(b)(2) and the related 

requirements at § 98.45(c), (d), (e), and 

(f); 

(vi) The requirement for a sliding fee 

scale at § 98.45(l); 

(vii) The requirement to have provider 

payment practices that reflect generally 

accepted payment practices at 

§ 98.45(m); 

(viii) The requirement that Lead 

Agencies shall give priority for services 

to children of families with very low 

family income at § 98.46(a)(1); 

(ix) The requirement that Lead 

Agencies shall prioritize increasing 

access to high-quality child care in areas 

with significant concentrations of 

poverty and unemployment at 

§ 98.46(b); 

(x) The requirements to use grants or 

contracts at § 98.50(a)(3); 

(xi) The requirements about 

Mandatory and Matching Funds at 

§ 98.50(e); 

(xii) The requirement to complete the 

quality progress report at § 98.53(f); 

(xiii) The requirement that Lead 

Agencies shall expend no more than 

five percent from each year’s allotment 

on administrative costs at § 98.54(a); 

and 

(xiv) The Matching fund requirements 

at §§ 98.55 and 98.63. 

* * * * * 

(g) Of the aggregate amount of funds 

expended (i.e., Discretionary and 

Mandatory Funds): 

(1) For Tribal Lead Agencies with 

large, medium, and small allocations, no 

less than nine percent shall be used for 

activities designed to improve the 


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Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Rules and Regulations 15417 

quality of child care services and 

increase parental options for, and access 

to, high-quality child care as described 

at § 98.53; and 

(2) For Tribal Lead Agencies with 

large and medium allocations, no less 

than three percent shall be used to carry 

out activities at § 98.53(a)(4) as such 

activities relate to the quality of care for 

infants and toddlers. 

* * * * * 

■ 21. Amend § 98.84 by revising 

paragraph (e) to read as follows: 

§ 98.84 Construction and renovation of 

child care facilities. 

* * * * * 

(e) In lieu of obligation and 

liquidation requirements at § 98.60(e), 

Tribal Lead Agencies shall obligate 

CCDF funds used for construction or 

major renovation by the end of the 

second fiscal year following the fiscal 

year for which the grant is awarded. 

Tribal construction and major 

renovation funds must be liquidated at 

the end of the second succeeding fiscal 

year following this obligation deadline. 

Any Tribal construction and major 

renovation funds that remain 

unliquidated by the end of this period 

will revert to the Federal government. 

* * * * * 

■ 22. Amend § 98.102 by revising and 

republishing paragraph (c) to read as 

follows: 

§ 98.102 Content of Error Rate Reports. 

* * * * * 

(c) Any Lead Agency with an 

improper payment rate that exceeds a 

threshold established by the Secretary 

must submit to the Assistant Secretary 

for approval a comprehensive corrective 

action plan, as well as subsequent 

reports describing progress in 

implementing the plan. 

(1) The corrective action plan must be 

submitted within 60 days of the 

deadline for submitting the Lead 

Agency’s standard error rate report 

required by paragraph (b) of this section. 

(2) The corrective action plan must 

include the following: 

(i) Identification of a senior 

accountable official; 

(ii) Root causes of error as identified 

on the Lead Agency’s most recent ACF– 

404 and other root causes identified; 

(iii) Detailed descriptions of actions to 

reduce improper payments and the 

name and/or title of the individual 

responsible for ensuring actions are 

completed; 

(iv) Milestones to indicate progress 

towards action completion and error 

reduction goals; 

(v) A timeline for completing each 

action of the plan within 1 year, and for 

reducing the improper payment rate 

below the threshold established by the 

Secretary; and 

(vi) Targets for future improper 

payment rates. 

(3) Subsequent progress reports 

including updated corrective action 

plans must be submitted as requested by 

the Assistant Secretary until the Lead 

Agency’s improper payment rate no 

longer exceeds the threshold. 

(4) Failure to carry out actions as 

described in the approved corrective 

action plan or to fulfill requirements in 

this paragraph (c) will be grounds for a 

penalty or sanction under § 98.92. 

[FR Doc. 2024–04139 Filed 2–29–24; 8:45 am] 

BILLING CODE 4184–87–P 


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