Recent legislation that increased the debt limit will also reduce states’ opportunities to meet federal work requirements in the Temporary Assistance for Needy Families (TANF) program.

Under current TANF policy, states can operate worker supplement programs (PDF) to provide small benefits to certain families and bolster their efforts to meet the federal work participation rate. Among other changes, the new law places restrictions on worker supplement programs; states that provide monthly benefits below $35 can no longer count recipients toward the work participation rate.

This policy change may make it harder for states to meet federal TANF requirements. Those that fail to meet them risk losing a portion of their TANF funding.

How states use worker supplement programs to meet federal requirements

TANF is a block grant program that provides cash assistance and other services to families with low incomes. It requires states to meet annual work participation rates. Current federal rules state that at least 50 percent of all work-eligible families and 90 percent of two-parent families must be engaged in specific work-related activities, but states can reduce these requirements by showing a reduction in their caseloads or increasing state TANF spending beyond standard requirements (PDF).

Because states may face challenges in helping TANF recipients retain adequate employment, many states extend assistance to employed families through worker supplement programs. These programs provide small benefits to families who are already complying with activity requirements and have incomes low enough to receive benefits funded by the block grant but are ineligible for regular monthly TANF cash aid. They may include recent TANF recipients who are ineligible for TANF because of increased earnings or current recipients of the Supplemental Nutrition Assistance Program (SNAP). Providing TANF-funded assistance to these families through worker supplement programs allows states to count them in the TANF caseload, thereby strengthening their ability to meet the work participation rate.

According to our calculations, about half of states operate worker supplement programs and provide benefits in the form of cash assistance or as a supplemental food benefit. Before the Fiscal Responsibility Act of 2023, there was no minimum benefit amount for participants to be included in the work participation calculation, and states’ worker supplement benefits vary widely. Beginning in October 2025, states will not be able to count families as meeting the federal work requirement if they receive a monthly cash or food benefit under $35.

The rationale for the change is a view among some lawmakers (PDF) that states’ use of worker supplement programs with very small payments has partially circumvented the intent of the TANF work participation rates. However, some critics of this change view worker supplement programs as an essential tool for states (PDF) to both meet the stringent federal requirements and maximize their capacity to serve other TANF recipients with barriers to employment.

Which states would the new restrictions affect?

Our analysis of state TANF policy materials shows seven states currently have worker supplement programs that offer a cash or food benefit under $35. In one of these states, Indiana, working families who become ineligible for standard TANF benefits solely because of higher earnings receive a $10 monthly cash benefit.

The remaining six states provide a small food supplement to working families. California, which has the largest TANF caseload in the country, provides a monthly $10 supplement to working families receiving SNAP. Massachusetts offers the smallest worker supplement; families receiving SNAP are eligible for a nutrition benefit of $1 per month. In Vermont, families who recently received TANF may receive a $50 food assistance benefit for 12 months, after which the benefit is reduced to $5 per month. (Under the new policy, families in Vermont could be included in the work participation rate in their first 12 months of the program but would not be counted while receiving a $5 benefit in the following months.)

States with Monthly Worker Supplement Program Benefits under $35

Source: Urban Institute analysis of state Temporary Assistance for Needy Families (TANF) policy manuals, state rules and regulations, TANF caseload data, and other sources. Additional states may operate small worker supplement programs that we are unable to identify through these sources.
Notes: Indiana’s worker supplement program provides a cash benefit to families who lose TANF eligibility solely because of increased earnings. California, Massachusetts, New Hampshire, Oregon, Vermont, and Washington provide food assistance benefits to families in their worker supplement programs. Vermont provides a $50/month food benefit to families in the first 12 months of the worker supplement program. The food benefit is reduced to $5 in months 13–24.

Implications for state TANF programs and recipients

The new worker supplement restrictions could affect both TANF recipients and state TANF programs.

Evidence shows providing earning supplements to working families can improve their social and economic well-being (PDF). Families with low incomes could lose out on the modest financial support—which can make all the difference for people with low wages—if these states opt to end their worker supplement programs and prioritize other ways to meet the federal requirements. Though the current benefit amounts aren’t substantial, the worker supplements may help families close the gaps between their monthly expenses and available resources.

At the program level, the new floor may make it more difficult for states that provide a small benefit to meet the federal requirements, which would increase their risk of a financial penalty (PDF). States may react to these challenges by tightening activity requirements or eliminating certain activity exemptions in an attempt to engage more families in activities that help the state meet the federal work participation rate. This response could further limit access to assistance for families in need.

To mitigate these risks, states could consider increasing their worker supplements to meet the $35 floor. States that increase the benefit could continue to count these families toward the work participation rate and would be expanding financial support for families with low incomes. If states can continue counting these families toward the work participation rate, they would have greater flexibility in how they engage the remainder of the TANF caseload in activities and could focus on a wider range of supportive activities that may not meet the federal work participation standards. States with current monthly benefits below $35 will have to balance the costs of increasing benefits with their goals to support families with low incomes and meet federal work requirements.