Illinois Paid Family and Medical Leave Insurance? Ugh, no!

Last updated on: April 30, 2025 at 6:55 pm by Jane the Actuary

0 Comments

Illinois Paid Family and Medical Leave Insurance? Ugh, no! 2025-04-30T18:55:06-06:00 Jane the Actuary

LOGO Patheos Explore the world's faith through different perspectives on religion and spirituality! Patheos has the views of the prevalent religions and spiritualities of the world.

Illinois state capitol; https://commons.wikimedia.org/wiki/File:Illinoiscapitol2.jpg

The state of Illinois is coming to the close of the legislative session. Some bills, like the Homeschool Act, have been put on ice. But the Paid Family and Medical Leave Insurance Program bill has been given an extension to May 9th, which, even though it has comparatively few sponsors and hasn’t made it out of committee, I understand this extension to indicate that it has some level of support from top Democrat Senate leadership. Weirdly, it’s in the Paid Leave Committee which apparently has all of three members and only two bills for its consideration.

This bill, very generally speaking, aims to create a Social Security-like leave benefit, and there are in fact several states which have had disability/leave benefits for some time now, specifically, New York, New Jersey, and California. Those benefits had historically been meant to cover disabilities for up to 6 months, or until Social Security or company-paid Long-Term Disability kicks in, and at a rate similar to company LTD benefits, so something like 60% or 67%. In recent years those plans have added a maternity leave component, and these are funded with Social Security-like payroll taxes, up to a Social Security-like maximum, and have a Social Security-like maximum benefit. Since this is for any kind of disability and for maternity leave as well, you don’t “earn” your benefit by contributing over the years; you get the same amount regardless of for how many years you’ve been contributing. (This is from memory, so some of the particulars may have changed.)

Which, in principle, is fine. The lack of maternity leave benefits causes hardship, all the more so because even under the best of circumstances, young couples struggle to have a large savings cushion. If a program is properly designed and the cost is appropriately calculated with sound actuarial assumptions, a maternity benefit would even be a good thing to implement at the federal level.

But at the same time, a system which is too generous and lacks sufficient safeguards can become extremely costly; back in my days as an international retirement and benefits expert, the typical “case study” was the Netherlands where, prior to a set of reforms beginning in the 1990s, disability benefits were so generous that as much as 15% of the total labor force was receiving disability benefits.

And, based on my read of the law itself, this is exactly what Illinois would be headed for, with two characteristics of the Illinois bill that put it at significant risk of being fiscally unsustainable:

The program (that is, the state of Illinois) would pay 90% of pay, so the NY/NJ/CA motivation to return to work to get back on the payroll rather than losing 1/3 of pay is not there.

And the list of eligibility reasons goes far beyond childbirth or serious illness, with minimal or even in some cases without any verification required.

Here are the details, straight from the bill’s text:

The bill covers the following situations:

Providing care for a family member, when needed due to a “serious health condition or medical procedure.” Note that “family member” is defined expansively, to include not just a child, spouse, or parent but “any other individual related by blood, marriage, or civil union or whose close relationship with the employee is the equivalent of a family relationship,” and “serious health condition” refers to any condition requiring an inpatient stay or “continuing supervision by a health care provider.” “Psychological care” is not defined. In this case, the government may require certification from the treating health care provider or alternative documentation if “it is impractical or impossible to acquire certification from a health care provider.”
Being with a child during the first 12 months after birth, or after adoption or foster care placement or other caregiving begins, or after establishment of legal parentage (which appears to include surrogacy arrangements as well as legal determination that a man is father to the child). Note that the child must merely be a “family member” of the worker, so that, strictly speaking, a grandparent could take leave to provide child care to delay starting daycare. What’s more, no certification is required.
One’s own “serious health condition” which includes stillbirth/miscarriage “or other conditions in connection with pregnancy” and recovery from childbirth. The government may again require a certification.
The “covered individual’s own reproductive health care,” which includes everything from abortion, to prenatal checkups, from IVF to surrogacy. Again, no certification is required.
Time off work due to domestic or sexual violence. Here the certification can be in the form of a statement from a “victim services organization or advocate.”
The deployment of a family member.

The benefit rate is fixed at 90% of the average wage, with a maximum of the state average weekly wage, or $1,200 per week initially, for up to 18 weeks per year, plus an additional 9 weeks for leave “taken in connection with pregnancy, recovery from childbirth, related conditions, or if the child of the covered individual was a patient in the neonatal intensive care unit.” (What is a “related condition” to “pregnancy”? That’s the euphemism of choice for abortion, but why you’d need 9 weeks, I can’t imagine.)

I cannot identify any mechanism to limit the duration to what’s truly needed for any particular case.

All employees except for the very lowest earners are eligible, and the benefit is based on the average pay during the highest quarter, among the four quarters before taking the benefit. In other words, if your job is seasonal, the period with the highest wages is used for your benefit. Also, unlike the FMLA which has restrictions around employer size, all employees are covered regardless of the company size or duration of employment, and even in the smallest of employers, a leave-taker would have the right to get their same or an equivalent job back, and to keep their health insurance.

Payroll taxes will be collected totaling 1.12% of pay beginning in 2027, increasing to a maximum of 1.25% of pay, split between employer and employee. I cannot identify any provision for the reduction in benefits if the 1.25% tax isn’t enough to cover costs but there is a provision that the state makes an “advance payment.” Perhaps it’s also just a given that the state would top up the funds as needed?

There is language in the bill that fraudulent claims will be penalized, but it’s really rather vague, in contrast to very extensive procedures laid out for employees who complain of retaliation from their employers for requesting leave.

Finally, the leave benefits (which ordinarily are taxable by the federal government) would be nontaxable by the state, which means that the difference between salary and benefit would be very small indeed.

What’s it all boil down to?

There is a huge disconnect between the generosity of the benefits and the enforcement mechanism. The larger the benefit – in this case, nearly 100% of wages, or more, for someone whose pay was seasonal or had recently dropped – the more important some enforcement mechanism is, and here there is nothing other than a bland “certification” (sometimes not even required), and, in particular, nothing that ensures that people only take leave for the necessary length of time. In fact, the vague definitions, such as providing “emotional care” or the expansive definition of “family member” or the fact that the “certification” document doesn’t specify a certification of the duration of the need, all add up to the difficulty of defining fraud, rather than merely using the program more widely than intended.

Now, there are plenty of ill-conceived bills which go nowhere. At various points recently I’ve read bills which propose to create a single-payer health system as well as a bill proposing that the state “fully fund” public universities’ operating costs, as well as a bill which would have legalized prostitution. But, again, this bill’s deadline extension suggests that it’s not just a typical “go-nowhere” bill, but is under serious consideration, and for a state with a track record of overspending and failing to perform sound analysis of the cost of its programs, that’s a problem.

Uncategorized

Illinois politics

Previous Post

April 6, 2025

What are YOUR legislators up to? A report from Illinois

Next Post

May 6, 2025 The Hubris of Suburbia, Arlington Heights edition

Which Psalm contains the line, "Taste and see that the Lord is good"?

Select your answer to see how you score.

Psalm 23 Psalm 51 Psalm 34 Psalm 100