A July 11, 2018 hearing before the Senate Finance Committee Subcommittee on Social Security, Pensions, and Family Policy, "Examining the Importance of Paid Family Leave for American Working Families," revealed bipartisan interest in paid family leave programs but a lack of consensus over how they should be paid for, whether through a new payroll tax or a reduction in Social Security benefits.

Subcommittee Chairman Bill Cassidy (R-LA) asserted that preserving the retirement benefits promised to US workers is "paramount" and any Social Security-based proposal cannot weaken the program. He highlighted a "two-year pilot program" authored by Senators Deb Fischer (R-NE) and Angus King (I-ME) and enacted in the Tax Cuts and Jobs Act to provide a tax credit to employers that offer low- and moderate-income employees at least two weeks of paid leave. The credit is 12.5% of family and medical leave wages paid that are at least 50% of normal wages, and is increased if wages are higher; the employee's compensation may not exceed 60% of the compensation threshold for highly compensated employees.

Ranking Member Sherrod Brown (D-OH) cited a recent EY survey finding that the majority of large companies support the creation of paid family and medical leave programs on the state or federal level that are funded through tax contributions. He said some members are proposing cuts to Social Security to pay for such programs that could be viewed as beginning the process of dismantling Social Security. "I want to work together, but a plan that's a first step toward privatizing Social Security — the bedrock of our social safety net — is no place to start," Senator Brown said.

First panel

The first panel featured Senators Joni Ernst (R-IA) and Kirsten Gillibrand (D-NY), who back the two leading proposals to emerge thus far.

Senator Ernst said she has been working with Senators Marco Rubio (R-FL) and Mike Lee (R-UT) on a proposal to allow parents to elect to receive a paid leave benefit through Social Security, in exchange for deferring Social Security benefits upon retirement. She noted that President Trump highlighted paid leave during his State of the Union address and that the Administration has worked to develop a dialogue with Congress on the issue through the leadership of Ivanka Trump, who attended the hearing.

Senator Gillibrand testified regarding her FAMILY Act (S. 337), which would provide workers up to 12 weeks of leave at as much as 66% of their salary, funded by matching contributions from workers and employers of two-tenths of 1% of each paycheck. She said the FAMILY Act is an earned benefit that is portable when a worker switches jobs, and for the cost of a "cup of coffee per week" provides 66% of wages. Additionally, "the FAMILY Act does not create the false choice between covering someone during a medical emergency today, and cutting their Social Security retirement benefits later," she said.

Second panel

Witnesses for the second panel were:

— Andrew Biggs, Resident Scholar, American Enterprise Institute

— Vicki Shabo, Vice President for Workplace Policies and Strategies, National Partnership for Women & Families

— Carolyn O'Boyle, Managing Director, Deloitte Services, LLP

Biggs suggested that workers will be reluctant to fund paid leave "with a new payroll tax of 0.4% of their wages, as proposed in the FAMILY Act," and that employers mandated to provide paid leave would likely offset the costs by reducing wages or changing hiring practices. While policymakers should rightly be concerned about the Social Security funding shortfall, he said, the costs of a paid leave program funded through Social Security are trivial relative to the trillion dollar-plus annual outlays of the program.

Shabo said the FAMILY Act is the only current proposal that offers meaningful benefits and is affordable and sustainable for workers, employers and the government. She said it would be "reckless and unnecessary to jeopardize Social Security's core functions and workers' retirement savings in order to provide paid leave," and that the program "should not be limited, cut or privatized."

O'Boyle primarily discussed Deloitte's Paid Family Leave Program.

During questioning, Senator Brown again suggested that the proposal being developed by Senators Ernst and Rubio would be a first step toward privatization of Social Security, and expressed concern that it would compel workers to delay retirement. Biggs said it would be a mistake to think the proposal is a first step toward privatization.

Chairman Cassidy said he is very concerned about the government's current obligations and questioned whether federal dollars applied toward paid family leave would supplant funds already being paid by some employers. Cassidy concluded that there is limited capacity to raise payroll taxes for anything other than current obligations, and said lawmakers would act with "false compassion" if they were to put forward a new plan that cannot be sustained.

Member statements and witness testimony are attached.

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ATTACHMENTS

Biggs Statement

Brown Statement

Cassidy Statement

Ernst Statement

Gillibrand Statement

O'Boyle Statement

Shabo Statement