SD17 - Feasibility of the Department of Social Services Paying Social Security Taxes on Behalf of Companion and Family Day Care Providers
Executive Summary: Introduction Mrs. Samuels is happy she can stay in her own home, even though she is disabled from a stroke and arthritis. Mrs. Samuels warded off expensive nursing home placement due to the Department of Social Services' Companion Service Program. Her companion provider enables her to stay at home by preparing her meals and assisting her with household tasks she can no longer do on her own. Ms. Winters is a single-parent of two children juggling a full time job, college and parenthood. Quality child care has given Ms. Winters the peace of mind she needs to devote much of her time and energy to studies and employment. The child care paid for by the local department of social services is an investment in the future for Ms. Minters and her children. By paying Ms. Winter's child care costs now, the Department of Social Services is paving the way for her independence of the welfare system. Few Virginians realize the importance of the work performed by companion and family day care providers. The elderly and disabled adults across the Commonwealth depend on companion providers like Mrs. Davis for help with bathing, meal preparation, housekeeping, and many other essential activities of daily living. Family day care providers like Mrs. Perry care for children and enable their parents to maintain employment. Quality, affordable companion and family day care are essential services needed by the Commonwealth's most vulnerable citizens--the elderly, the disabled, and children. Senate Joint Resolution 37 requested the Secretary of Health and Human Resources to examine the feasibility of local departments of social services paying FICA (Social Security taxes) on behalf of companion and family day care providers. This study found that payment of FICA on behalf of companion and family day care providers is not feasible. However, other options such as increasing provider wages and enhancing training are presented for consideration. This report is very timely. The employment status of companion providers particularly and the subsequent payment of FICA has been an issue for many years. The options presented in this report present a challenge to the Commonwealth and an opportunity to enhance social services for disabled adults, the elderly and children. I. Methodology This report describes Virginia's companion and family day care programs and assesses the feasibility of paying FICA on behalf of those providers. Information was gathered through a variety of methods which included surveys of public and private provider agencies, roundtable discussions, personal interviews with companion and family day care clients, their respective providers and social workers, and a literature search. II. Companion Service A. Program Description The term "companion service," when used in this report includes chore, companion and homemaker services provided by the local department of social services. Companion service is the primary type of home care provided by local departments of social services. Through the Companion Service Program, disabled adults and elderly persons receive help with tasks of daily living such as meal preparation, bathing and toileting. There are two criteria for eligibility for companion service -- need and income. The typical recipient of companion service is a white, widowed female in her seventies with no more than a grade school education. Her monthly income is between $337 and R682 and she receives an average of 14 hours of companion care per week. In fiscal year 1987-88, an average of 3,758 persons received care through companion service. The majority of companion providers are a friend or relative of the client and are between the ages of 41 to 61 years. Companion providers constitute the Department of Social Services' oldest group of individual providers. As of July 1, 1988 local departments of social services reported 4,102 approved companion providers. Funding for companion service comes from a combination of federal, State and local dollars. With the decreasing availability of Social Services Block Grant (SSBG) funds, State appropriations and 100% local funding have maintained the existing level of services. Local departments of social services work in conjunction with other State and local agencies to design individualized plans of care with varying local resources. The Virginia Department of Social Services, the Social Security Administration and the Internal Revenue Service interpret the employment status of companion providers differently. The Department of Social Services considers these providers to be self-employed individuals -- responsible for paying their own FICA. The Social Security Administration takes the position that companion providers are employees of the client, that is, the disabled adult or elderly person receiving care. The Internal Revenue Service takes the position that the local department of social services is the employer for purposes of withholding. Survey responses from other states demonstrate that nationally the interpretation of employment status of companion providers differs from state to state. B. Findings 1. Feasibility of Paying FICA Within the existing service delivery structure, it is not feasible for local departments of social services to pay FICA on behalf of companion service providers because: • currently companion service providers are considered self-employed persons. If FICA were to be paid by local departments of social services, the current self-employed status could be jeopardized; and • under existing budgets there are insufficient federal and State funds to pay the FICA (7.51%) taxes; additional appropriations would be required. 2. Other Related Findings The most prevalent finding in the surveys and interviews was that provider wages are uniformly low. The average hourly rate of pay for companion providers is $2.88 per hour, with some providers paid as little as $1.25 per hour. Low wages paid to companion service providers have recruitment and quality of care implications. The majority of local departments of social services do not provide any training to companion service providers. Survey responses document that 35% of local departments provide initial training and 17% do in-service provider training. Current policy gives local departments the flexibility to provide training according to local needs and resources. C. Companion Service Options Option I: Purchase Companion Service Only from Approved Agencies Discussion -- This option would require the revision of the current service delivery system in order to utilize only provider agencies. By limiting the purchase of companion service to agency vendors, companion workers would receive at least minimum wage, employee benefits (including FICA), and training. Because this option would drastically alter the current system, further analysis is needed to determine the cost and the long-range advantages/disadvantages to both the client and the individual companion worker. Option II: Enhance the Current System Utilizing Individual Companion Providers Discussion -- The existing system which allows for the purchase of companion service from individual, self-employed providers can be enhanced in three ways: increase providers wages to minimum wage; provide a 2% cost of living increase to providers already receiving minimum wage; and, provide training to providers. a. Increase Wages to Minimum Wage -- Increasing the hourly rate of the 2,708 companion providers currently working that are paid below minimum to minimum wage ($3.35 per hour) would require the following funds: 1989-90 General Fund: $1,236,922 Non-General Fund (Local Match): $309,230 Total: $1,546,152 Action by the General Assembly and the State Board of Social Services would be needed to require local departments to pay minimum wage to companion providers. b. Provide Cost of Living Raise for Companion Providers at Minimum Wage -- Increasing the hourly rate by 2% for the remaining 938 providers now receiving minimum wage would require: 1989-90 General Fund: $30,088 Non-General Fund (Local Match): $7,522 Total: $37,610 Action by the General Assembly and the State Board of Social Services would be needed to require local departments to increase provider rates. c. Implement Statewide Companion Provider Training Statewide training to ensure basic provider knowledge and skills for approximately 4,000 providers would require the following funds: 1989-90 General Fund: $ 270,157 Non-General Fund (Local Match): $0 Total: $270,157 Action by the General Assembly and the State Board of Social Services would be needed to require locally approved companion providers to participate in this training. Family Day Care A. Program Description The term "family day care," when used in this report, includes in-home and family day care services provided by local departments of social services. Family day care provides supervision and care for children for a part of a 24-hour period. Families eligible for family day care must meet established income criteria. Parents whose children receive family day care may be employed, receiving education and training leading to employment, or temporarily ill or absent from the home. The availability of family day care varies by locality depending upon need, local priority, funding and availability of providers. There is no one family day care client profile. Family day care serves families in a variety of circumstances -- families receiving public assistance (Aid to Dependent Children), families participating in the Employment Services Program, and working families earning 70% of the State's median income whose child care costs exceed 10% of the family's total income (Child Day Care Fee System). Family day care providers are typically female, between the ages of 18 and 40, and a friend or relative of the client. As of July 1, 1988, there were approximately 2,095 providers approved by local departments of social services. Both the Department of Social Services and family day care providers consider the employment status of family day care providers to be self-employed. The self-employed status of these providers is consistent with data collected from other states. As self-employed persons, family day care providers are responsible for paying their own FICA. Local departments of social services set their own rates of pay for the family day care providers in their localities. Providers are reimbursed for their services. Family day care providers are not paid when the child is absent due to illness or other circumstances. In contrast, family day care providers in the private sector frequently require payment in advance of services to avoid reduction in pay due to circumstances such as the child's illness. Family day care is funded by a combination of federal, State and local dollars. When the needs of the community for family day care exceed available funding, some localities provide 100% local funds to ensure that family day care is available to families in need. B. Findings 1. Feasibility of Paying FICA Payment of FICA by local departments of social services to family day care providers is not feasible because: • currently family day care providers are considered self-employed persons. If FICA were to be paid by local departments of social services, their current self-employed status could be jeopardized; and • research conducted for this report indicates that self-employed providers prefer to remain self-employed. 2. Other Related Findings The most prevalent finding surfacing in survey and interview data is that provider wages are uniformly low. As of July 1, 1988, local departments of social services pay family day care providers hourly wages that range from $.35 to $1.75. This low rate of pay is closely related to the lack of funding and the high need for the service. Current data from local departments of social services document the need for increased training of family day care providers. Although approximately 50% of the local departments provide in-service training, only 16% of the local departments provide any initial training. Of those local departments of social services providing training, many contract with local community colleges or other community resources to accomplish the training. Family day care providers regard themselves as small business operators and need training in business management. Additional education in areas such as record keeping, bookkeeping and taxes would enable family day care providers to take maximum advantage of their self-employed status. Fluctuating income is a major problem for the family day care providers utilized by local departments of social services. When a child is absent from family day care due to illness or other circumstances, the family day care providers' income is reduced. The family day care providers interviewed report that fluctuating income is always inconvenient and can cause major money management problems for their families. C. Family Day Care Options Option I: Increase Rate of Pay to Family Day Care Providers Discussion -- The current average family day care provider rate of pay is $.88 per hour. This option would increase that rate to $1.00 per hour. The following funding would be required: 1989-90 General Fund: $466,997 Non-General Fund (Local Match): $ 51,889 Total: $ 518,886 Action by the General Assembly and the State Board of Social Services would be needed to require local departments to increase rates of pay. Option II: Reimburse Family Day Care Providers Based on Enrollment Discussion -- To reduce fluctuations in income due to circumstances beyond the control of the family day care providers, reimbursement would be made according to the planned enrollment. The following funding would be required: 1989-90 General Fund: $231,110 Non-General Fund (Local Match): $25,679 Total: $256,789 Action taken by the General Assembly and the State Board of Social Services would be required to accomplish this option. Option III: Implement Training/Certification Program Discussion -- Statewide training of all family day care providers would ensure minimal knowledge of child development/behavior and appropriate caregiving techniques, and business management techniques. The following funding would be required to train the approximately 2,095 family day care providers: 1989-90 General Fund: $72,397 Non-General Fund (Local Match): $0 Total: $72,397 Action by the General Assembly and the State Board of Social Services would be required to accomplish this option. Summary Companion and family day care providers serve two different populations with very different care needs. This study documents those differences and identifies some options for consideration that would enhance the lives of those providers and ultimately the quality of care given to disabled adults, the elderly and children across the Commonwealth. |
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