Family Leave Hearing Witness Proposes Disability Benefits Tax Credit

The House Ways and Means Committee has given U.S. disability insurers a lift just in time for the May Disability Insurance Awareness Month campaign: a little attention for the idea that disability insurance can help employers pay for paid family leave.

Rachel Greszler, an economist who appeared today at a committee hearing on paid family and medical leave, talked about the idea of using expanded access to private disability insurance to promote paid family leave.

(Related: Social Security Should Not Be a Piggy Bank for Paid Leave)

Greszler, a research fellow at the Heritage Foundation, said that a new federal paid family and medical leave program would probably be limited and hard to use.

“But a lenient program would invite misuse and abuse,” Greszler said.

States such as New Jersey have found that promoting their state-run paid leave programs, to give workers real awareness of and access to existing paid leave benefits, leads to sharp increases in spending, Greszler said.

She argued that making a paid leave program part of Social Security would lead to similar problems.

Already, she said, pressure to expand Social Security retirement benefits has contributed to the fact that Social Security payroll taxes eat up a much bigger share of workers’ pay now than when the program was created.

Greszler proposed several private-sector-based alternatives to a new, purely government-run paid leave program.

“Increase access and awareness of private disability insurance policies that cover a lot of a families’ needs,” Greszler said at the hearing.

In her written testimony, Greszler said policymakers should consider providing a payroll tax credit to employers who provide their workers with qualified disability insurance policies.

“This policy would have the added benefit of increasing access to medical and maternity leave benefits,” Greszler said in the written testimony. “Congress could also increase workers’ enrollment in employer-sponsored temporary disability insurance policies by clarifying in legislation that employers have the same legal authority to automatically enroll employees (providing they have an opt-out) into their temporary disability insurance policies as they have to automatically enrollment in their retirement plan.”

Greszler also proposed creating universal savings accounts, or USAs, that would help families save money for emergencies, such as family health crises, without worrying about having to pay tax penalties when they take withdrawals.

Some states, such as New York state, have created paid family and medical leave programs that give employers the ability to provide paid family and medical leave through commercial insurance arrangements.

Several witnesses at the hearing other than Greszler spoke in support of providing universal paid family leave coverage through a government-run social insurance program.

Suzan LeVine, Washington state’s employment security commissioner, testified that the paid leave program in her state gives employers the option of offering and administering a private plan that meets minimum state benefits thresholds.

Resources

Links to hearing resources, including a video recording of the hearing, are available here.

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