Letter to Senate Finance Committee: Social Security Trust Fund Should Not Finance Paid Family Leave

July 10, 2018

The Honorable Bill Cassidy, M.D.
Chairman
Subcommittee on Social Security, Pensions and Family Policy
Committee on Finance
United States Senate
Washington, DC 20510

The Honorable Sherrod Brown
Ranking Member
Subcommittee on Social Security, Pensions and Family Policy
Committee on Finance
United States Senate
Washington, DC 20510

Dear Chairman Cassidy and Ranking Member Brown:

On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I am writing to express our strong opposition to legislation that would create a new parental leave benefit that would be paid for by cutting the future Social Security benefits of those who choose to receive this proposed new benefit.

As we understand the proposal, which has been developed by the Independent Women’s Forum (IWF), new parents would be allowed to receive up to twelve weeks of paid parental leave by borrowing from the eligible parents’ future Social Security benefits. Apparently, the parental leave program would determine the amount of the leave benefit by using the Social Security Disability Insurance (DI) benefit formula. Participation would be voluntary, but a consequence of participation would be a reduction or delay in participants’ future Social Security retirement benefits that would offset the costs of the family leave benefits they receive.

The National Committee believes that Congress should develop provisions that provide financial assistance to parents and other caregivers that ease the burden of child or elder care. However, paid caregiving leave should not be funded by raiding the Social Security trust funds. We offer the following observations:

Essential Social Security benefits should not be traded away for paid family leave. Our Social Security system is a foundation of economic security for workers and their families in the event of a worker’s retirement, disability or death. While we believe that expanding access to paid parental leave is important for all workers, we do not think that Social Security should be used to pay for these benefits.

Workers should not face the cruel dilemma of future delays or reductions in Social Security benefits to pay for family leave benefits today. Study after study has shown how difficult it is for workers to estimate their financial needs in retirement. Having to choose at an early age between paid family leave in the here and now and reductions in future retirement benefits presents all parents with a cruel dilemma that is unnecessary and unwise.

Retirement security should be strengthened, not eroded. According to the Urban Institute, under the IWF proposal, parents who take 12 weeks of paid leave would have to delay their Social Security retirement benefits by five to six months, depending on details in the legislation. Those receiving paid family leave for 24 weeks would see their future Social Security benefits reduced for a total of 10 to 12 months. For many future retirees, this delay will be a severe financial burden, and one that may come as a surprise to those affected by it. It will be a burden because Social Security is a major source of income for most retirees; it provides over half of total income for most aged beneficiaries, and 90 percent or more of income for nearly one in four aged beneficiaries and over two in five aged non-married beneficiaries. Given the limited nature of other pensions and retirement income, these individuals will be ill-equipped to repay the family leave they received so many years ago.

Delays or permanent reductions in Social Security benefits will harm seniors. The IWF and similar proposals could be paid for in a number of ways. For example, some might propose increasing the retirement age for individuals who previously received paid family leave (in effect a permanent reduction). Alternatively, costs could be recovered by withholding all of a retiree’s initial Social Security until the paid family leave has been fully repaid. While we understand that the funding concept is to fully compensate the Social Security trust funds for all benefits paid, the extent of an individual’s liability isn’t entirely clear. For example, would former family leave recipients have to cover lost interest incurred by the trust funds? Would they be responsible for repaying leave payments made to individuals who die before reaching retirement age? Neither the trust funds nor retirees should have to pay for these costs.

The Social Security Administration is already seriously underfunded and in no position to undertake a complex new workload. For a number of years now Congress has significantly underfunded SSA’s administrative budget. Massive backlogs have developed in the hearing offices and those who request a hearing on their disability benefits are required to wait nearly two years, on average, for a decision on their claim. Administration of a paid family leave program would be a major new responsibility for SSA, one for which they would need substantial additional administrative funding. We are uncertain as to the likelihood that such funding will be made available, leading to the possibility that the agency would have to draw on already-existing resources to implement a program of paid family leave.

To be clear, the National Committee supports the concept of paid family leave. Ours is one of the few advanced countries in the world that does not provide some form of assistance to young families undertaking the task of caring for a newborn child. However, we do not think that those seeking to establish such a program should look to the Social Security program as a means of paying for the benefits or for their administration. Since the inception of the program, Americans have regarded their contributions to Social Security as sacrosanct and available only for Social Security. The National Committee believes it should stay that way, and therefore urges you to oppose any legislation that relies on Social Security as a means for financing a program of paid family leave.

Sincerely,