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Some disability program comparisons

Some disability program comparisons

Last updated on: April 7, 2016 at 7:09 pm by Jane the Actuary

Some disability program comparisons 2016-04-07T19:09:12-06:00 Jane the Actuary

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What do maternity leave programs look like in those states which have adopted a program?

This is just a data dump, as I set about compiling this information for myself and thought readers might be interested.

First, California.

They’ve had a state disability program for two decades, which pays 55% of pay for up to 12 months, up to an annual covered pay of $106,742. The benefit is fully employee paid, via payroll deduction, which is treated as a tax and tax deductible as with any other state tax.

The current rate is 0.9%. Does this reflect the full cost, or are there additional funds coming from general state revenues? Based on the Wikipedia list of contribution rates it seems to be the former — that is, the rate bounces up and down a lot, which seems to suggest that it’s adjusted each year based on the prior year’s shortfall or surplus. What’s noteworthy is that the rate started at 0.5% when the program began in 1996, climbed to 1.18% in 2004, then dropped again, and has fluctuated at around 1%. Likely there are causes in the underlying economy, but I can’t discern anything obvious.

The parental leave program was an extension of the state disability program, implemented in 2004. New parents, as well as those taking FMLA-type leave of other kinds (e.g., care for a sick family member), receive 6 weeks. For women who’ve just given birth, this is in addition to 6 weeks of state disability benefits. How much has it cost Californians? The costs are combined with the state disability program, and there’s no obvious jump in premiums upon parental leave implementation.

What’s been the effect? Here’s a sunny case study on California from Harvard, that says everyone’s happy, and it’s been a nonevent for employers. Here’s a 2015 article from Bloomberg that says much the same thing. At the same time, there were articles not long ago, which (sorry!) I can’t find any longer, which said that middle-class women are more likely to use the benefit, because poor women can’t manage a 45% pay cut.

Second, New Jersey.

As with California, they built on a pre-existing state disability program; however, their family leave program (fact sheet here), implemented in 2009, is a free-standing program.

Both programs pay 2/3rds of pay up to a ceiling, the rate is higher than California’s but the base is much lower, with covered wages at $32,600, according to this FAQ. Benefits are paid for 26 weeks for disability, and 6 weeks for family leave.

For disability, workers pay 0.2% of pay, and employers pay between 0.1% and 0.75% of pay, which I presume to be based on the likelihood of claims at a given employer given the risk level of the work.

For family leave, workers pay 0.08% of pay, up to a maximum of $26.08, based on the same covered wages maximum. It’s not immediately clear if, as with California, this rate fluctuates based on the prior or projected deficit or surplus, or if there is any cross-subsidy from the one to the other program.

New Jersey’s program operates as a “single-payer with opt-out” system. That is, employers either collect and remit to the state the employee and employer contributions, or operate their own disability and maternity programs. The idea here is that an employer will typically offer its own sick leave/short-term disability program and it can be administratively easier to just encompass the NJ mandatory benefits than to have two separate benefit programs.

Third, Rhode Island.

Temporary Disability Insurance benefits: 60% of pay (or a weekly benefit of 4.62% of a quarter-year’s pay). Covered pay $68,900 per year. Benefits last up to 30 weeks.

Temporary Caregiver Insurance: same benefit levels for up to 4 weeks (effective 2014).

Cost for both programs together: 1.2% of pay.

Hawaii has a disability program which functions solely by mandating that employers provide benefits to their employees, in the amount of, minimally, 58% of pay for 26 weeks, up to a covered pay of $51,000 per year. They have (so far as I can tell) no family leave program, except to require employers who offer sick leave, to permit employees to use 10 days per year for care of a family member rather than their own illness.

New York I wrote about at length yesterday.

Oh, and Puerto Rico also has a disability benefit, but, let’s face it, with as many economic troubles as they now have, they’re not a good model.

So what do you make of this?

What’s surprising is how variable the costs are — but New Jersey is the only one with a defined cost solely for the 6 weeks of family leave.

So, given these examples, which, if any, seem reasonable to you?

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family leave

parental leave

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