Proposed Paid Parental Leave: In the Federal Budget, But Few Details

Last week, the Trump Administration released its first proposed budget.  From the perspective of working parents and employers, one of the most noteworthy elements calls for the establishment of new federally-mandated employee benefit:  6 weeks of paid family leave.

This proposed new program will provide mothers and fathers with six weeks of paid leave following the birth or adoption of a child.  This marks an expansion of prior Trump-proposed leaves which restricted leaves to mothers and their biological children.  The current proposal expands leaves to include fathers and adopted children.

The Administration directs that the program will be administered by states and paid through their unemployment insurance programs.  Some existing state benefits for paid parental leave may already meet this new standard, while others would need amendments.  Currently, California, Rhode Island, Washington, New Jersey, New York, and the District of Columbia provide or will soon provide some form of paid parental leave.

Not many details are known about the mechanics of the proposal, leaving many questions to be answered by Congress:

  • Will Congress support this proposal?
  • What is the amount of the individual benefit? Will it be a partial or complete income replacement? (Indication are that there will not be an income limit for eligibility, though high wage earners may have a cap on their benefits)
  • How will this be funded? Through increased unemployment taxes paid by employers?  By reallocating funds through unemployment benefit reforms? Will employers contribute directly or only indirectly to fund employees’ leaves?
  • How much variation state-by-state will be permitted? According to The Budget of the United States Government, Fiscal Year 2018, “A New Foundation For American Greatness” (“The Budget”), the Administration’s proposal “will allow States to establish paid parental leave programs in a way that is most appropriate for their workforce and economy”. ttps://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/budget.pdf.
  • Are all employers covered, or just employers of a certain size? Are some industries exempt?
  • Are all employees eligible? What are the eligibility requirements?  Is it based on length of service, hours scheduled per week, or some other factor?
  • Does the proposal include leaves to start fostering children, as set forth in The Family and Medical Leave Act of 1993 (FMLA)?
  • How will employee benefits be paid during leaves, in the same way as with FMLA?
  • Will positions be guaranteed upon return from leave? Can temporarily vacant positions be filled during leaves?

The estimated cost of the program is expected to range between $18.5 and $25 billion over 10 years, with a projected reach of 1.3 million people.   The proposal provides “States broad latitude to design and finance the program”, again per The Budget.

The plan does call for states to maintain a minimum level of unemployment trust funds, which would require states with lower fund balances to grow their coffers.  The Budget also offers other cost “offsets” for the proposal, namely “a package of sensible reforms to the UI system including reforms to reduce improper payments, [and] help unemployed workers find jobs more quickly”.

Of note, and as is widely reported, the United States is the only developed country, and one of a small handful of United Nations member countries, that does not guarantee new parents any paid time off work to care for their children.  This proposal is good news for working parents in that they may soon have mandated paid leaves for the birth or adoption (or foster care?) of a child.  The news is not so good for employers who will likely see higher SUTA tax payments.

More details will come over the next few months as the Trump Administration and Congress sort out the details of the budget and this proposed program.