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2024 CCDF Rule New Payment Practices Requirements – Implementation Considerations for State Policymakers

2024 Child Care and Development Fund (CCDF) Rule Promulgation

Authors: Leigh Bolick, M.Ed., Lead Author, Dawn Downer, Michelle Hight-Thomas, MSW

The new CCDF Rule, Improving Child Care Access, Affordability, and Stability in the Child Care and Development Fund (CCDF), was published in the Federal Register on March 1, 2024, with an effective date of April 30, 2024. It initiates sweeping changes that are intended to help stabilize the child care provider community by adopting private-pay practices such as paying by enrollment. In addition, it includes requirements to help families access services more easily, while improving their access to quality child care services.

The purpose of this brief is to provide some context for a discussion of key questions and considerations that may assist State Child Care Administrators and their staff as they move forward. The federal regulations must be implemented quickly, just as the pandemic funding is ending and during a time of upheaval in the child care provider community. We begin by providing a brief review of the highlights of the rule, including information about three important definitions and policies underpinning some of the requirements. This is followed by a practical discussion of key implementation issues, to help guide thoughtful discussions at the state level, as administrators customize their policies to meet the needs of the citizens in their states.

Primary Federal Objectives

The Administration for Children and Families (ACF) was guided, in part, to develop the federal rule with the following objectives in mind:

  • Reducing costs to families by lowering copayments.
  • Improving services to families by making family enrollment easier and faster and helping them find care that best meets their needs.
  • Improving payments to providers by implementing private-pay policies and delinking payments by enrollment from absences.
  • Reducing red tape by encouraging the use of presumptive eligibility.

New Rule Highlights

The new rule requires specific policy and process changes yet promotes state flexibility by encouraging the use of other, preferred, policies. It also allows states to define authorized eligibility for enrollment purposes. Some of these are highlighted below and discussed elsewhere in this brief.

Required Policies and Practices

  • States may not assign a family co-pay above 7% of income, to reduce the burden on families.
  • States must make payments based on enrollment rather than attendance.
  • States must use prospective payments to align with private pay business practices to help stabilize the industry.
  • States must use some direct provider contracts/grants in offering services to families.
Encouraged Policy and Practices
  • States may eliminate parent co-pays by prioritizing categorically eligible children.
  • States can pay at a market rate above what a provider charges to the general public.
  • States may implement presumptive eligibility to connect families to providers quickly and easily.
  • States may choose to re-start the entire family’s eligibility period when they enroll another sibling in child care.

Key Federal Definitions and Policies

There are three federally defined policies and practices that are key to understanding the complexities of the new rule. They are discussed at length here to provide a fuller picture of how they are clarified throughout the regulations and to make it easier for states to make decisions. Authorized Enrollment, for example, offers states more latitude to define their own processes (subject to approval by ACF).

Authorized Enrollment and Attendance
  • ACF declined to define enrollment, and instead added flexibility for states by using the term “authorized enrollment.” Section 98.45 of the preamble states: “we decline to include a definition of ‘‘enrollment’’ in the regulatory language…we revised the regulatory language to say payment must be based on ‘‘authorized enrollment’’.
  • Authorized enrollment for eligibility determination is essentially defined by the state and can include the minimum information required to determine eligibility. States can verify eligibility by checking TANF (Temporary Assistance for Needy Families) and Supplemental Nutrition Assistance Program (SNAP) rolls, verifying a family’s work or educational attendance, or confirming protective services status.
  • 98.21(a)(5)(i) allows Lead Agencies to discontinue child care assistance prior to the next redetermination period when there have been excessive unexplained absences (as defined by the state), despite multiple attempts to contact the family and provider, including prior notification of possible discontinuation of assistance.
  • Section 98.45 indicates that payment for absences is not considered an overpayment. From the preamble: “payment for absences is not considered overpayment and does not get recouped.” Only cases of fraud and intentional program violations appear to be subject to recoupment.
Prospective Payments
  • The final rule amends 98.45(m)(1) to require States and Territories to ensure timely provider payments by paying providers participating in CCDF in advance of, or at the beginning of the delivery of, child care services.
  • 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.
  • For families choosing to change child care providers in 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.
Presumptive Eligibility
  • States may elect to provide Presumptive Eligibility. Section 98.21 states: “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.”
  • 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, If a child meets Lead Agency policies for Presumptive Eligibility, enrollment, and verification, they are considered eligible for Presumptive Eligibility services.
  • Section 19.21 states: 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…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”.

Implementation Considerations

The remainder of this document is intended to provide information for state policy and program leaders as they customize and implement the federal regulations to meet the needs of their respective states. Administrators and their staff are the true state experts; the information presented herein is not intended to replace that expertise, but to provoke thought as states move forward to quickly meet the new federal requirements. It is organized by Key Points, followed by issues for states to consider as potential implementation actions. It is by no means a complete listing but a thoughtful starting point. The first includes the initial state questions that were discussed upon passage of the regulations, followed by more actionable steps and checklists.
Initial State Questions
Key Point: States must have a flexible infrastructure that can accommodate up-front payments and track attendance to ensure vouchers are being utilized by the family; initial state questions may include:

  • Does the requirement require a change in state law? What are the political implications in my state?
  • Can my current child care data system be modified to pay up-front, or do I need a new system? When can I begin determining the business processes, goals, and outcomes necessary to be able to release a procurement for a new or modified system?
  • Does my state’s centralized purchasing and business operations process (comptroller) and data system allow for prospective payments or are they invoice-based?
  • Do I make payments for another agency or program, such as preschool vouchers, which will be impacted by the changes?
  • What policies, manuals, handbooks, and consumer education materials must be changed? This will include external agencies’ materials, such as Child Care Resource and Referral.
  • How much will the changes cost and what funding sources will the agency use?
  • Do I need more staff? If so, how many staff and what job duties do I need them to perform?
  • Have I started the hiring paperwork and how long will that process take?
Key Point: Because so many departments and agencies will be involved, consider your agency and state leadership your first “customers” when communicating the regulatory changes.

  • Briefing your entire agency leadership, including the State Agency Director, regarding the changes as soon as possible, including representation from HR, fiscal. and auditing departments, the advocacy/legislative representative, procurement staff, contracting staff, IT representatives, the agency communications director, and legal counsel, among others.
  • At the direction of leadership, brief your governor’s office; ask for a liaison to communicate with regularly. Consider giving the governor’s liaison an office at the agency and ask for regular office hours, if possible, so the governor’s office stays well-informed and can offer direction as needed.
  • Develop an approved communications plan that includes internal staff, other agencies, and key legislators. Expand it as soon as possible to include families, providers, and the general public.
  • Since these decisions will be made by agency leadership, and you may not be allowed to attend briefings, develop individualized talking points for each audience.
  • Because changes may take a long time to implement, develop a script for staff to use to talk to providers as they become aware of the new federal rule. Disseminate the script to your key partners.
Cost Projections

Key Point: Estimate individual and total costs as quickly and accurately as possible.


  • After briefing your agency leadership, ask for a key liaison to be assigned by each department head to serve on a CCDF implementation team. 
  • Name the team, set up a meeting schedule, and establish a method for sharing information, such as a Teams channel. Keep the implementation team updated by sending all pertinent information, questions, and answers, and posting documents to the channel. Report on the importance of the team and their progress in internal agency newsletters.
  • Develop a realistic budget that includes, for each individual initiative, the total internal agency cost; use the same costs and cost descriptions for every department.
  • Determine how to calculate the cost to the state to implement the federal regulation limiting family copays to 7% of the family’s income. Work with internal agency staff and external state experts to review available data and investigate all implications of this fiscal change, including any potential tax or revenue impacts.
  • Determine if the state intends to pay above the market rate survey or using an alternative methodology, as the new rule codifies this existing flexibility to pay above the private rate; include cost information. 
  • Be prepared to justify every cost and have at least 3 agency staff who can answer, or readily locate the answer for, questions about how the costs were derived.
Political Context
Key Point: Recognize that the payment rules associated with the new federal regulations could have political implications and address those issues early and often.

  • With executive approval, meet with key legislators or legislative staff members to get out in front of the issue, rather than reacting when contacted about the new requirements. For ongoing questions and discussions, it can sometimes be more helpful to collaborate with legislative committee staff, if allowed in your state.
  • Provide each with a simple one-or two-page bulleted summary of your discussion; include the name and contact information for the appropriate agency contact
  • Be especially careful to word the information objectively and confine comments to facts only.
  • Include information about state flexibility, which allows states to make needed services easier to obtain while closely monitoring eligibility and usage of the services.
  • Provide relevant dates, such as the effective date of the rule (April 30, 2024), the waiver application timeline (May 1, 2024 – November 30, 2024), and the final expiration date for all waivers (August 1, 2026).
  • Expect to address costs.
Key Point: Address programmatic and financial reporting changes at the beginning of the process, not the end, and build them into the computer system changes.

  • Meeting internally with agency fiscal, contract, and auditing staff (and subsequently their state counterparts) to review and address changes expected to be reported on the ACF-696 CCDF Financial Reporting Form. For example, the final rule adds clarifying language at 98.65(h)(3) that grants or contracts for child care services are considered a direct service expenditure, which must be reported as such on the ACF-696.
  • Include information about presumptive eligibility, if the state elects this option, and review the additional financial reporting data that will be required.
  • Address fraud mitigation and revising the agency’s internal policies and processes for monitoring and auditing CCDF records.
  • Review information about the State Improper Payments Corrective Action Plan (ACF– 405) and ACF–404 Improper Payment Report. Section 98.102 expands the required components of error rate corrective action plans and requires that states identify the root causes for payment errors.
  • Review the error rate threshold (10% at present) and the state’s current improper payment rate and statistics.
Data Systems
Key Point: Decide quickly whether your CCDF data system can be modified or if your state will require a new computer system; either way, begin identifying business processes immediately.

  • Meet with IT leadership, including the implementation team, to make a quick but informed decision about whether the current system should be modified or whether you will need to procure a new system. Be sure to account for the fact that all waivers will expire on August 1, 2026, and are not renewable after the 2-year period expires.
  • Acknowledge that ACF is aware that some provisions in the final rule have requirements that will require complex and extensive IT and data system changes that can take a long time to complete.
  • Also note that the work will need to begin even prior to the issuance of relevant federal guidance, so solutions have to be flexible enough to accommodate changes.
  • Modifying a system would, at a minimum, require a contractual change, and a new data system would require issuing an RFP for bids. Agency and state contract and procurement staff will need to be briefed and instructed to move through their processes quickly and efficiently. Two years is not a long time to determine necessary changes, define business requirements, develop the IT solutions, pilot the program, complete systems, perform system and acceptance testing, and launch a new or revised data system.
  • Data System changes could include those related to paying by enrollment, paying prospectively, incorporating presumptive eligibility requirements, absence reporting, family and provider notifications, and many others, depending on Lead Agency policy and process decisions.
  • When considering the criteria bidders should respond to and be evaluated on, CCDF leadership should weight substantially those IT contractors who can demonstrate they have significant child care expertise, preferably those employing former State Child Care Administrators who have implemented large program changes and developed large data systems. Their expertise will allow the state to begin working at an efficient pace more quickly. In addition, require a complete change management plan.
  • Remember to include new consumer reporting requirements (such as the posting of full monitoring visits) and capture changes needed for Improper Payments, and Market Rate requirements, including the ability to pay providers above the private pay rate, as appropriate. Include changes for ACF-696 financial reporting as well.
  • Determine your goals for the revised CCDF program and design reports to meet your needs. Include the ability to design your own ad hoc reports, and measure progress efficiently through the use of project dashboards.
Provider Grants and Contracts
Key Point: Due to an emphasis on the use of grants and contracts, review your state’s current usage of these service vehicles to ensure they continue to align with your programmatic goals.

  • Meet with agency procurement and contract staff (and subsequently their state counterparts), including the implementation team, to provide an overview of regulatory requirements regarding the use of grants and contracts. The rule requires Lead Agencies to use some grants and contracts for direct child care services to enable CCDF to better address supply issues and ensure equal access to quality services.
  • The rule prioritizes grants or contracts for direct services for infants and toddlers, children with disabilities, and children in underserved geographic areas.
  • Provide an updated listing of your current list of contracts, descriptions, and purposes, discuss whether they already meet the purposes outlined in the regulations, how they might need to change, and determine whether legal or procurement changes should be made to accommodate the state’s revised goals and outcomes.
  • Ask for a point person to work with CCDF program staff (there should already be one representative from that department on the implementation team).
Federal Waivers
Key Point: Since Transitional and Legislative Waivers will be available for up to two years, determine which waivers will be most advantageous to your state, Consider:
  • Developing a management brief on the CCDF waivers. Include the provisions eligible for a waiver, which are outlined below:
    • Capping copayments at 7% of family income.
    • Paying providers prospectively.
    • Using enrollment-based payment.
    • Using some grants or contracts for direct services for infants and toddlers, children with disabilities, and children in underserved geographic areas.
    • Posting full monitoring reports for Consumer Awareness requirements, including compliances and non-compliances, and eliminating blank checklists.

Describe the process of applying for a waiver and potential agency reasons and justifications for applying for specific waivers

Key Point 2: Since Transitional and Legislative Waivers will be rigorously evaluated prior to approval by ACF, outline your arguments early. Considerations:
  • Once agency decisions are made regarding waiver applications, begin outlining the content for each potential waiver.
  • Work in concert with the implementation team to complete the outline from a full-agency perspective.
  • Begin writing waivers as each section of the outline is approved.
  • Monitor and include any new federal waiver interpretations regarding waivers; thoroughly review the information in the preamble of the new rule for insight into the waivers and potential arguments that may be approved by ACF.

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