WASHINGTON ― Sen. Marco Rubio (R-Fla.) and Rep. Ann Wagner (R-Mo.) unveiled a novel idea for offering parental leave to more Americans on Thursday: Having them pay for it with their own retirement savings.
Instead of mandating that employers cover paid family leave, or proposing new sources of revenue to pay for it, the proposal would give new parents the option of dipping into their future Social Security retirement benefits so they can have time off to care for a newborn. The trade-off would be significant: lower Social Security benefits for life ― and possibly waiting as much as a year longer to retire, according to analysts.
“It’s an option. It’s akin to what people are now do with their 401(k), which is to make an early withdrawal,” Rubio told HuffPost on Wednesday. “It’s their money, you just have a choice whether you want some of it now, or all of it later.”
“If someone has a better idea that doesn’t involve raising taxes, we’ll be interested in it,” he added.
Under the proposal, titled the Economic Security For New Parents Act, those who choose to withdraw from their Social Security benefits early will be able to get at least two months of leave after the arrival of a child by birth or adoption.
Parents making $70,000 a year would get two months of payments equivalent to about 70 percent of their income ― enough to cover expenses, according to a summary from Rubio’s office. The plan would allow parents to transfer all or part of their benefit to their spouse, as well as make stay-at-home parents who have an “earnings history” eligible to withdraw from their retirement savings.
Significantly, the bill leaves out those who need to care for sick family members or tend to their own serious health issues. About 75 percent of those who take unpaid time off through the federal Family and Medical Leave Act use the time for those purposes. All six states that have paid-leave policies include provisions for this type of family leave.
The U.S. is one of only a handful of countries in the world that does not provide some kind of maternity leave benefit to new parents. Yet an overwhelming majority of Americans approve of the idea of paid leave. Rubio is the first Republican legislator to float a significant parental leave proposal, a sign of how popular the issue has become, and of the persistent efforts of Ivanka Trump, who has pushed for legislation.
Paid leave has long been a goal of progressive groups and some Democratic politicians who already support the Family Act, a bill that would fund leave through a small payroll tax.
You’re asking someone who is probably in their 20s or 30s to take a gamble and try to predict what their whole life is going to be like. Former Social Security Administration analyst Kathleen Romig on Rubio's plan.
These advocates were quick to criticize the GOP plan, calling it essentially a backdoor attempt to cut Social Security benefits that would particularly disadvantage women, low-income Americans and people of color ― who already see lower benefits in retirement.
“A program that only covers parents caring for new children, provides no leave for family care and personal medical needs, and forces parents to choose between paid leave and retirement security is absolutely the wrong way to go,” Debra Ness, president of the National Partnership for Women & Families, said in a statement Wednesday. “In fact, it is reckless, irresponsible and ill-conceived. This is a Social Security benefit cut for the working people who need Social Security the most.”
The bill is largely based on a proposal released earlier this year by the Independent Women’s Forum, a conservative group founded in 1991 by women defending then-Supreme Court nominee Clarence Thomas from accusations that he sexually harassed Anita Hill. More recently, the group has decried the Me Too movement and downplayed the role that discrimination plays in the gender pay gap.
The group’s president has even said that its paid leave idea would have the added effect of changing Americans’ views on Social Security ― making it less like an untouchable retirement fund and more like a piggy bank available whenever you need cash.
“Indeed, encouraging people to think about Social Security’s assets as if those benefits are their property for use now or at retirement could even encourage people to want to move more in that direction and transform the current pay-as-you-go system into one that pre-funds future benefits and with assets that belong to individuals,” Carrie Lukas wrote in a February piece for The Federalist.
Lukas claims many Americans don’t want that much money when they’re older ― since they need it now ― and are happy to work longer into old age.
The shift has long been a dream for some conservatives but largely viewed as impossible to pull off.
The fact that you can’t steal money from your retirement to get out of a financial jam when you’re younger has been one of the keys to Social Security’s overwhelming success in keeping elderly Americans out of poverty.
And though Rubio and the bill’s backers at the conservative women’s group say that using some of your Social Security to pay for paid leave means you only have to put off retirement for a few weeks, in practice it may actually mean you see lower benefits for the entirety of your retirement.
“It’s cutting your benefit for the rest of your life,” Kathleen Romig, who worked for years as an analyst at the Social Security Administration, told HuffPost earlier this year.
One April analysis from the Urban Institute found that those who use the benefit for one 12-week leave would lose 3 percent of their retirement savings. A parent who takes four leave periods would lose 10 percent.
The new bill would also mean that those who choose to take leave more than once will not be able to retire at age 62 and draw Social Security benefits, Romig told HuffPost on Thursday. That’s an enormous caveat. About half of all retirees start collecting benefits at that age, according to data from 2010.
“You’re asking someone who is probably in their 20s or 30s to take a gamble and try to predict what their whole life is going to be like ― their health, job situation, marriage ― and give up the right workers have had for decades to take that benefit at 62 if that’s what’s best for them,” said Romig, now a senior policy analyst at the Center on Budget and Policy Priorities.
Democrats are likely to oppose the proposal, saying that it doesn’t provide enough benefits to working people and that it would put too much of a strain on the already burdened Social Security system. They generally support plans financed through higher spending or tax contributions from employers and workers.
It’s unclear how many Republicans will get behind the Rubio bill, however. The plan would expire automatically by the end of 2023, giving some GOP senators who are wary about meddling with a popular program like Social Security a reason to go along.
Ivanka Trump, one of Rubio’s biggest allies who has made paid family leave a top priority in the White House, said Thursday she was optimistic about the prospect of bipartisan compromise on the issue but that it would take time.
“Not in this Congress,” the president’s daughter said in an Axios interview.
This story has been updated to clarify when the bill would expire.