Publisher's Perspective

Can't be everything for everyone: This is a new entitlement for those who become parents. Those who already are parents still have to take unpaid leave for certain conditions related to their children, in many cases they can use their sick leave for those conditions, and virtually always can use annual leave. But there’s a big difference between unpaid leave and paid leave.

On one hand, federal employees just got a new paid parental leave benefit collectively worth $3.3 billion over the next five years – but on the other hand, many of them won’t see a dime of that.

Many federal employees have had a natural “what about me?” type of reaction to learning that the new parental leave benefit was signed into law. And there is a good lesson about federal employee benefits in all of this: not all benefits are of equal value to all.

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First, a little background:

Congress and the White House recently agreed to provide federal employees with up to 12 weeks of paid parental leave per 12 months, substituting for the unpaid time that has been available under the 1993 Family and Medical Leave Act for purposes related to the birth, adoption or foster placement of a child.

That came together quickly, in an only-in-Washington manner: the White House accepted House Democratic-sponsored language to provide the paid leave in return for House Democrats accepting the creation of a new Space Force as a new arm of the military, an issue that with little public indication had become a top priority of the president—who in turn was lobbied for the paid leave idea by his daughter/adviser.

DoD Bill Signed; Guidance on Paid Parental Leave Likely to Come

That aside, there’s a lot to be said about the new benefit, which will begin for births or placements after September 30:

* It’s arguably the largest new federal benefit since the FMLA created the unpaid leave entitlement.

* It is the biggest in a sequence of what had been minor improvements in leave for federal employees.

* It could set a precedent for broader use of paid parental leave outside the federal government.

* It could help the with government’s problems in recruiting and retaining younger workers, who otherwise might choose employers that already offer such leave.

It doesn’t apply to the other purposes for which unpaid time is available under the FMLA related to certain medical conditions of the employee and close family members—and any part of the total 12 weeks per 12 month FMLA entitlement that will be used as paid parental leave will reduce the amount of unpaid leave available for those purposes.

The initial House language would have provided paid leave for those other purposes but was dropped as part of the compromise; sponsors say they will try again in 2020.

Also, it was done so quickly that the Congressional Budget Office didn’t have time before the change was passed into law to estimate the potential cost—the type of estimate that often has killed a proposal, once the dollar signs are attached. In this case, CBO estimated after the fact that the parental leave will cost agencies—and thus be worth to employees—$3.3 billion over five years.

CBO didn’t say exactly how it arrived at that figure, but did list several elements. First, with paid leave available employees naturally will take it rather than going on unpaid parental leave. Second, to the extent that employees who took parental leave have substituted sick leave or annual leave for the unpaid time, they will no longer do that.

In fact, it even noted that there will be a long-term value to those employees in retirement by saving more of their sick leave, which turns into credit as time served at retirement.

What CBO didn’t say explicitly, but which is obvious, is that parental leave will be valuable only to a segment of the workforce—those who choose to become parents—the large majority of whom will be on the younger side. Which leaves out most federal employees, the large majority of whom are on the older side—71 percent are age 40 or older, for example—to say nothing of retirees.

Remember, this is a new entitlement for those who become parents. Those who already are parents still have to take unpaid leave for certain conditions related to their children, in many cases they can use their sick leave for those conditions, and virtually always can use annual leave. But there’s a big difference between unpaid leave and paid leave.

Not all Benefits Of Equal Value

Which is a good opportunity to consider that not every federal benefit is of equal value to everyone. Take for example the FEHB health insurance program. In the largest plan, Blue Cross Standard, the government pays $235.77 toward premiums of a self-only enrollment biweekly but $546.47 toward a family enrollment. Same employee, but would get almost twice as much in the government contribution if in a different family situation. And if that employee is in a family enrollment, there is no additional cost for covering, say, three children plus a spouse compared with covering just one child and a spouse.

About 16 percent of federal employees are not enrolled in the FEHB at all, typically because they are getting coverage through a spouse’s enrollment elsewhere. That would almost certainly be because they are getting a better deal that way, but still they are passing up money the government is paying to others—and which they do not get in any other form as a recompense.

The same goes in the FEGLI life insurance program. The government will pay a third of the cost of Basic insurance (a coverage amount of annual salary rounded to the next $1,000 plus $2,000) yet 22 percent are not enrolled. Again, that generally would be because they have chosen other life insurance, but they similarly are passing up what others are getting.

Or consider the TSP. Employees under the CSRS system get no government contribution but those under FERS get up to 5 percent of salary—if they invest at least 5 percent, which so many fail to do and also pass up on money they otherwise would get.

Or how about the retirement system itself, with its more generous benefits calculation and COLA benefits for CSRS, and within FERS the higher level of contributions that are required of employees hired after 2012 with no increase in benefits.

So, no, paid parental leave will not benefit all federal employees. It will be of great value to some, some value to others and no value to yet others.

If you’re in that last category, at least consider that its approval might represent a change in direction from what’s been happening for years to federal benefits. The next improvement to come down the road could be of great value… to someone, perhaps you.

FERS Retirement Planning Guide 2020