Family Leave Proposal Could Shortchange Social Security Now and Retirees Later

By Jessie Gibbons, Legislative Director

The Senior Citizens League is monitoring a legislative proposal that would negatively impact the future of the Social Security program and weaken retirement security in America if adopted.   The Economic Security for New Parents Act was recently introduced in the House and Senate, and it’s quickly gaining steam on Capitol Hill.  The bill would use Social Security’s finances to create a new federal paid family leave program, and it would require young workers who claim the benefit to pay for it with reduced Social Security benefits in retirement.

The Economic Security for New Parents Act, which was introduced earlier this year by Senator Marco Rubio (FL) and Congresswoman Ann Wagner (MO-2), would cause Social Security to become insolvent more quickly in the short term, and it would lead to significantly reduced lifetime benefits for future retirees who receive paid parental leave.

Here’s how the program would work.  Following the birth or adoption of a child, new parents – both working and stay-at-home parents – would be eligible to claim up to twelve weeks of paid family leave.  To cover the cost, individuals would essentially borrow against their future Social Security benefits by delaying the claiming of their Social Security benefits in retirement.

Those who take twelve weeks of paid family leave would see their full eligibility ages in retirement increase by around twenty-five weeks – that’s more than double the duration of the leave.  The full eligibility ages of those who take two leaves would increase by nearly a year, from age sixty-seven to sixty-eight. And those who take three or four leaves after having children would see even more significant long-term impacts on their Social Security benefits in retirement.

The Senior Citizens League opposes the Economic Security for New Parents Act, and our legislative team is advocating against its adoption on Capitol Hill for these six reasons…

1. It would lead to permanent cuts in retirement benefits.  According to the Urban Institute, parents who take paid leave one time would see a 3.2 percent cut in their Social Security benefits in retirement.  A reduction of that size is substantial for individuals living on fixed incomes for thirty years or more, especially since research shows Social Security benefits are already failing to keep up with rising costs.
2. It would penalize those who have more children and take more leaves.  The Urban Institute estimates that those who take two paid leaves would see permanent Social Security benefit cuts in retirement of around 5.5 percent, and those who take paid leave four times would see cuts of 10 percent in retirement. With fertility rates in the United States currently at record-low levels, lawmakers should be cautious about reducing future retirement benefits for those with more children.
3. It would be a bad deal for women and low-wage workers. This program is expected to be utilized more frequently by women and low-income earners – the two populations who can least afford future benefit reductions due to paid leave. Women and low-wage workers already tend to receive significantly lower Social Security benefits in retirement than do men and those with higher earnings.
4. It would disregard others in need of paid leave.  TSCL understands the importance of paid leave – not just for new parents, but also for caregivers who provide care to older family members and younger family members with serious medical conditions.  Congress might want to consider a more comprehensive proposal that includes all populations in need – including those caring for aging parents.
5. It would worsen the solvency of the Social Security Trust Fund, threatening the benefits of people who are already retired.  Despite claims that this program would not cost one penny, research shows that it would strain the Social Security Trust Funds.  According to a report from the American Action Forum, this proposal would have a net cost of around $226 billion.
6. It could set a dangerous precedent.  Allowing individuals to borrow against their future Social Security benefits for non-retirement purposes would undermine the program’s mission of providing financial protection to older and disabled Americans. Similar programs offering education benefits or student loan forgiveness to young adults in exchange for reduced retirement benefits would likely follow, if this program were implemented.

For these six reasons, The Senior Citizens League is urging lawmakers to reject this proposal and to consider others that would include benefits for those who also care for aging or ill family members.  Most importantly, TSCL believes that fiscally responsible legislation must rely on sources of funding other than that from Social Security. This could potentially include new tax revenues or tax credits for employers.

A paid family leave program is important to grow the work force, increase population numbers, and ultimately strengthen the financing of the Social Security program with more payroll tax revenues.  However, The Senior Citizens League firmly believes the Economic Security for New Parents Act is neither a responsible or realistic answer.

In the months ahead, The Senior Citizens League will continue to oppose this paid leave proposal on Capitol Hill, and we will advocate for legislation that would strengthen retirement security in America. For progress updates, visit the Legislative News section of our website, or follow TSCL on Twitter.

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