Pension & Benefits News FAMILY Act under scrutiny at Ways and Means hearing
Monday, February 10, 2020

FAMILY Act under scrutiny at Ways and Means hearing

By Pension and Benefits Editorial Staff

At a House Ways and Means Committee hearing on proposals for paid family and medical leave, there was considerable daylight between positions about the likelihood that the FAMILY Act would work well for everyone, but there was consensus that access to paid family and medical leave should somehow be expanded.

FAMILY Act. Re-introduced in February 2019, the sponsors of the proposed FAMILY Act, H.R. 1185, underscored that the legislation would:

  • Provide up to 12 weeks of partial wages to working people who need to take time away from their jobs to address a serious personal or family health issue, to care for a newborn or newly adopted child, or for circumstances arising from a loved one’s military deployment or serious injury;
  • Be self-funded through payroll contributions from employers and employees of just two-tenths of 1 percent each (two cents per $10 in wages), or about $4 a week total, split between employers and employees;
  • Guarantee portable coverage so that workers who have multiple jobs, change jobs, or are self-employed would be provided the same security as traditional employees; and
  • Provide 66 percent wage replacement, capped at $4,000 a month.

Status quo not good enough. In his prepared opening remarks at the hearing, Chairman Richard Neal (D-Mass.) said that workers right now must rely on "a patchwork of options with huge gaps." He noted that a limited number of states provide coverage to all of their workers, some employers provide paid leave to their most highly compensated employees, and a smaller group of employers provide it to all of their employees. "Some workers spend down all of their savings, and some leave the workforce and never return," Neal said. "This status quo leaves out the majority of the middle class and does far too little to keep Americans of all income levels in the labor force."

Neal noted that less than one-fifth of workers are offered paid family leave by their employers. "And even in the current tight labor market, the vast majority of recent growth in employer-sponsored paid leave benefits went to highly paid workers, leaving most middle-class workers behind."

In Neal’s view, the current situation disadvantages small businesses. "Without a federal backstop for paid leave, small businesses are at a competitive disadvantage compared to bigger American competitors who can spread the cost over a larger pool of employees, and especially compared to foreign competitors whose employees get state-funded benefits," he explained.

Wage-replacement paid leave. Neal pointed to FAMILY Act, which would be a "real, wage-replacement paid leave" so that workers can pay the bills. The legislation uses "a well-tested mechanism to allow all workers to earn paid leave protection by making small monthly contributions," Neal explained.

Other proposals. "By contrast, I am concerned about proposals that would force new parents to choose between paid leave and the Social Security benefits they need to protect their families and have a secure retirement," Neal continued. "For example, using analysis from Social Security’s Chief Actuary, the Committee estimates that under such proposals, a medium-earning new mom who took paid leave for the birth of two children would receive about $11,000 in paid leave benefits and then have her Social Security benefits cut by about $29,000."

Just another tax hike. But Ranking Member Kevin Brady (R-Texas) called the FAMILY Act "just another outrageous tax hike that American workers can’t afford." While the Democrats claim the legislation will be fully paid for by a 0.4 percent payroll tax increase, "equivalent to just ‘the cost of a cup of coffee per week,"’ Brady said the nonpartisan Joint Committee on Taxation estimated that the true cost of the FAMILY Act "will require a substantial payroll tax increase, anywhere between ‘2.7 and 3.1 percent."’ According to Brady, that could cost an average worker making $50,000 well over $1,500 a year in new taxes, whether they use the program or not. "Over a career, that’s more than $60,000, which could be spent on diapers, groceries, or to pay for college," Brady said.

Republican plan in the works. "Americans deserve a paid family leave plan that helps families and small businesses, not a one-size-fits-all Washington mandate," according to Brady. He said that the committee Republicans are working on a plan that will:

  • Increase access to paid leave;
  • Build on what is already working; and
  • Ensure families can choose what works for them.

"We believe we need to evaluate the incentives we have in place today to encourage expansion of employer-provided paid leave, making permanent the Employer-Provided Paid Family and Medical Leave tax credit," Brady explained. He said that we should also continue to empower "job creators" so they can tailor paid leave plans to fit their workers’ needs, not Washington’s needs.

As to small and mid-sized businesses that simply cannot afford to offer formal paid leave benefits, increasing access to private insurance options or making it easier to pool together could help defray costs, according to Brady.

Turning to low-wage workers, Brady noted that they are also at a disadvantage and the least likely to have access to paid leave through an employer. "Just as they are benefiting the most from the surge in wages in this new economy, they may have to take on debt or putting off bills to cover lost wages after the birth of a new baby," Brady explained.

The Ranking Member also suggested: "Federal efforts should be focused on low-income families, particularly families in at-risk communities where paid leave can contribute to better health for new mothers and their babies."

In support of the FAMILY Act. Kemi Role, Director of Work Equity National Employment Law Project (NELP), offered her take in support of the FAMILY Act at the hearing, expanding on the following points:

  • A paid leave program must provide broad coverage for all family caregiving and personal medical needs;
  • A paid leave program must consider the needs of people of color and the structural inequities that compound their need for paid leave;
  • The FAMILY Act will create real opportunities for choice and change;
  • The U.S. can well afford to provide universal paid leave; and
  • The FAMILY Act is superior to the other legislative proposals.

Competing proposals inadequate. According to Role, the competing proposals to the FAMILY Act "are insufficient and rely on ill-advised financing schemes." She pegged as a "non-starter" any proposal that does not provide for paid leave for the full range of personal and caregiving needs. "Some have praised legislation providing only paid parental leave as a good start; we don’t think it is," Role explained. "We think it’s a wholly insufficient response to the increasingly crippling realities that people face in providing care for themselves and their family members."

Don’t deplete Social Security savings. Any plan that relies on depleting Social Security savings "is a disaster waiting to happen," Role continued. She cited a MetLife study of the financial costs of providing family care, which found that "nationally, women who leave work to provide caregiving work lose on average $142, 693 and stand to lose $131, 351 in Social Security benefits due to this time out of the workforce." Role argued that legislation borrowing from future benefits to provide these benefits would "only exacerbate the shortfall these workers will experience at retirement." NELP believes that the answer to the problem is to expand Social Security for everyone.

"Rather than increasing the Social Security penalty for caregiving work, we urge this committee to continue considering ways to improve final benefits for these and all workers as it continues its work to improve the program and achieve long-term solvency," Role said.

UI programs can’t handle anything more. Finally, any policy that would carve the benefits out of existing Unemployment Insurance (UI) programs "simply will not work," Role said. State UI systems have been reducing the amount of benefits and the number of people eligible to receive them over the past decade, she explained. "Much of that is due to the fact that states entered the last recession with UI trust funds that were insufficient to meet the challenges they faced and had to borrow from the federal system to pay promised benefits," according to Role. "As states recovered, many made the decision to make it harder to get benefits through their systems." Further, during times of low unemployment, states also receive less funding for administrative activities.

Social insurance program. But Rebecca Hamilton, the collaborative executive officer of the W.S. Badger Company, a small, family-owned, mission-driven manufacturer based in rural Gilsum, New Hampshire, population 802, pressed for a social insurance program: "The most effective paid leave policy for small businesses is a social insurance program, where small businesses have low, predictable contributions rather than having to cover the cost of paid leave themselves," she argued.

FAMILY Act a bad idea. Hadley Heath Manning, director of policy for Independent Women’s Forum, weighed in against the FAMILY Act, saying that the proposed legislation "would impose a payroll tax on all workers to fund benefits for those who qualify." Such an approach, "while well-intended, comes with serious policy tradeoffs, risks, and downsides: Namely, such a program could exacerbate inequalities, backfire on workers, and reduce overall economic opportunity," she said.

Regressive, not progressive program. According to Manning, government-paid family and medical leave programs have been shown to distribute money from low-income workers to those with higher incomes, as demonstrated by studies from California, New Jersey, Canada, Sweden, Iceland, Belgium, and Norway. She said that scholars concluded in Norway that "these programs constitute a ‘pure leisure transfer to middle and upper income families at the expense of some of the least well off in society.’" Manning called it "regressive, not progressive." She suggested that because the problem of a lack of paid family and medical leave is the most pronounced among low-income people, lawmakers should not establish a program that would disadvantage this group further.

Unfair burdens. "Furthermore, the FAMILY Act would tax everyone equally regardless of risk (or propensity for use)," she continued. "This would unfairly burden families with stay-at-home parents/caregivers as well as childless families, who have less need for caregiving and parental leave benefits. This is fundamentally unfair."

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