{"id":2965,"date":"2015-10-07T12:10:48","date_gmt":"2015-10-07T18:10:48","guid":{"rendered":"http:\/\/admin.patheos.com\/blogs\/janetheactuary\/?p=2965"},"modified":"2015-10-07T12:12:38","modified_gmt":"2015-10-07T18:12:38","slug":"reading-d-c-s-universal-paid-leave-act","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2015\/10\/reading-d-c-s-universal-paid-leave-act.html","title":{"rendered":"Reading D.C.’s Universal Paid Leave Act"},"content":{"rendered":"\n<\/head>

I\u2019ve been waiting for my lunch break all morning, having first read about D.C.\u2019s proposed new paid family leave benefit yesterday, and returned to it this morning before starting work. \u00a0If you\u2019ve missed the reporting on it so far, the bottom line is that it\u2019s a plan to provide 16 weeks of paid leave for a variety of needs, via a progressive payroll tax on employers paid into a central fund. \u00a0Is it a long shot to be passed? \u00a0Probably not, given that this is DC, which has very different dynamics compared to the rest of the country, in terms of who its employers are \u2014 and the proposal\u2019s design and the bill\u2019s text were funded by a $96,000 grant from the Labor Department (see this Slate article<\/a> for a general summary of the plan and its genesis).<\/p>\n

Now, I know plenty of folks reject any such plan completely out of hand \u2014 and I can well understand that a family in which one parent has chosen to leave the workforce to care for young children can be resentful of tax increases going to fund benefits specifically for those families who are already financially better off due to both parents working. \u00a0But that doesn\u2019t get us very far. \u00a0What I want to do is take a look at the specifics of the plan itself, which happily the Washington Post has available here<\/a>\u00a0though annoyingly in an image format so I can\u2019t copy\/paste relevant sections.<\/p>\n

Here are my bottom-line criteria for any such plan:<\/p>\n

1) Is it sustainable? \u00a0What\u2019s the program\u2019s revenue source and is it reasonably in line with expenses, or is there an adjustment mechanism if not?<\/p>\n

2) Is there moral hazard\/risk of abuse by its users?<\/p>\n

3) Is it fair to everyone involved?<\/p>\n

So:<\/p>\n

Who\u2019s eligible? \u00a0Per section 101 (3), a \u201ccovered employee\u201d means an individual who has the status of \u201cemployee\u201d and who works (>50% of work-time) for an employer in D.C., but neither the federal nor the city government. \u00a0An \u201celigible individual\u201d is an individual who lives in D.C. (101 (6)) who earned wages in some other fashion (e.g., working for a non-DC employer or for the federal government?) or who was self-employed and did not opt out.<\/p>\n

Section 103 (b) says \u201c. . . \u00a0benefits shall be paid to an individual who is not currently employed but who is an eligible individual meeting one of the requirements listed in subsection (a) of this section\u201d \u00a0\u2014 but subsection (a) just says \u201can eligible individual may claim . . . benefits for a qualifying event.\u201d \u00a0Was this just a drafting error, or is this intended to provide benefits to employees who have recently ceased working?<\/p>\n

Section 104 lays out the basics of the program: \u00a0100% of wages up to $1,000 per week, and 50% thereafter to a maximum of $52,000 per year, to be paid for 16 weeks per year maximum, for a variety of covered events \u2014 new baby, medical condition for self or family member, time away in connection with deployment (seems to be things like meeting with a financial planner) or a family member\u2019s return home, to be taken all at once, or intermittently, with a 5-day waiting period but with benefits payable for those 5 days if the illness extends beyond 5 days.<\/p>\n

Section 106 lays out funding: \u00a0ordinarily, contributions are graded by the employee\u2019s annual\/annualized pay:<\/p>\n

0% to $10,000<\/p>\n

0.5% from $10,000 to $20,000<\/p>\n

0.6% from $20,000 to $50,000<\/p>\n

0.8% from $50,000 to $150,000<\/p>\n

1% for $150,000 and above<\/p>\n

But if the fund balance is not sufficient to pay one year\u2019s worth of expenses, then employers pay a flat 1% of pay regardless of their employees\u2019 wages (which means that there is a crude adjustment mechanism so long as 1% is more than sufficient for benefits). \u00a0FWIW, here are my notes<\/a> on contribution rates on existing programs: \u00a0Canada provides parental leave for contributions of about 1.4% of pay, for a longer period of time (but less than 100%), but only for births, not the extensive list of other eligible events.<\/p>\n

106 (d) specifies that for those individuals working for employers outside DC or for the federal government (again, I think<\/em>), and for self-employed individuals, the contribution is made by the individual directly.<\/p>\n

There\u2019s also an odd bit, 106 (f) (2) that says that the city shall contribute an amount sufficient to \u201callow for the provisions of this title to go into effect one year following the effective date.\u201d \u00a0Does this just mean that DC covers administrative costs, or is this meant to suggest that DC makes up the different is the taxes are insufficient for program costs?<\/p>\n

Section 107: \u00a0provisions for the self-employed. \u00a0They are allowed to opt-out but otherwise auto-enrolled, with a 60-day enrollment period each year. \u00a0There are certain provisions against moral hazard: \u00a0a prior opt-out wishing later to join the program must sign up for a period of 3 years, and benefits will not begin until 1 year after enrollment.<\/p>\n

Then there\u2019s a lengthy bit about appeals and retaliation and other administrative bits.<\/p>\n

So:<\/p>\n

1) The adjustment mechanism to 1% of pay means it\u2019s probably<\/em> sustainable. \u00a0One hopes that the $96,000 was spent on solid actuarial modeling, though this quote from the Washington Post<\/a>\u00a0raises doubts:<\/p>\n

The D.C. Chamber of Commerce on Monday pushed back against the proposal, saying in a letter to the council that the business community has not been privy to the Department of Labor-funded research used to develop the legislation.<\/p><\/blockquote>\n

If, after all, an actuary had been pulled into the project to model this, there ought to be pretty solid documentation of the data and underlying assumptions, at least according to the Actuarial Standards of Practice that we have drilled into our heads at Continuing Education sessions. \u00a0That the Chamber of Commerce is complaining of not having this information (and I couldn\u2019t find anything online, either) is concerning.<\/p>\n

2) Moral hazard: \u00a0well, that depends on how big the so-called \u201cgig economy\u201d or \u201cUber economy\u201d is in DC. \u00a0Certainly, women who are planning on starting families would have every reason to sign onto the program, as well as anyone who sees a family medical need in the future (e.g., those on the other side of the \u201csandwich generation\u201d with an elderly parent in or at risk of ill health). \u00a0There is also no restriction, so far as I can tell, to only one or the other parent taking the benefit. \u00a0Certainly, if usage patterns based on current unpaid or partially-paid leave options are projected to continue into the future, rather than projecting increased usage based on full pay, this would be a mistake. \u00a0If, on the other hand, the self-employed are a small proportion of the population in D.C., then perhaps this is not a significant problem.<\/p>\n

3) Fairness? \u00a0Let\u2019s face it: \u00a0higher earners are paying for lower earners. \u00a0Is this \u201cfair\u201d or \u201cunfair\u201d? \u00a0No more or less than current income tax provisions. \u00a0But it would be wrong to promote this as a benefit in which recipients are \u201cpaying their own way.\u201d<\/p>\n

Bottom line: \u00a0well, my lunch break\u2019s over. \u00a0But in any case, I\u2019d really like to see the underlying actuarial modeling \u2014 and if none exists, well, then, sorry, no Jane the Actuary Stamp of (Qualified) Approval for you!<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

I\u2019ve been waiting for my lunch break all morning, having first read about D.C.\u2019s proposed new paid family leave benefit yesterday, and returned to it this morning before starting work. \u00a0If you\u2019ve missed the reporting on it so far, the bottom line is that it\u2019s a plan to provide 16 weeks of paid leave for […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2965","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nReading D.C.'s Universal Paid Leave Act<\/title>\n<meta name=\"description\" content=\"I've been waiting for my lunch break all morning, having first read about D.C.'s proposed new paid family leave benefit yesterday, and returned to it this\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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