The U.S. does not have paid maternity leave while the rest of the industrialized world enjoys weeks or months of fully paid, job protected leave. Your growing family budget may be stretched to the max, before factoring in a loss of income. If your employer does not provide paid leave there are four things you can do to create some maternity leave pay of your own: ask Uncle Sam to pick up the tab, tap state maternity benefits, buy short term disability, and buy hospital indemnity insurance.
Uncle Sam Provides Maternity Leave Pay
The introduction to this article stated that the U.S. does not have paid maternity leave laws, but Uncle Sam is happy to provide maternity pay to those smart enough to take advantage. One of our founding fathers, Benjamin Franklin is quoted as saying "a penny saved is a penny earned". Ben said this of course long before the advent of state and federal income taxes, and social security. A more updated version of that saying could be "a penny saved is a penny and a half earned". Consider a couple in the 25% federal tax bracket, paying state income taxes, and paying FICA taxes of 7.65%. This couple needs to earn $1.50 in order to take home $1. Anything maternity related that saves taxes creates maternity leave pay.
Women can generate significant un-reimbursed medical expenses during pregnancy. Estimate the amount of these expenses and make a corresponding election into your Flexible Spending Account (FSA). Any money funneled into this account reduces the amount of federal, state, and FICA taxes you pay. Many insurance plans today come with co pays, co-insurance, and deductibles which can be paid using your FSA.
If your child is born with health difficulties or developmental disabilities you may have unexpected bills. The birth of your child is a life event, allowing you to make changes during the plan year. When you are ready to return to work, you might be utilizing child care. These expenses can be paid using a dependent care FSA.
Tap State Maternity Benefits
Five states have mandated short term disability insurance which covers your normal labor and delivery, sometimes several weeks in advance of your delivery, and always for any pregnancy related complications that might cause additional time away from the job. The five states are California, Hawaii, New Jersey, New York, and Rhode Island. If you work in one of those states contact the state office for more details.
Two states offer paid family leave benefits that allow for an additional six weeks of paid leave so that you can bond with your baby. California and New Jersey both provide this benefit as an extension of the state disability program.
Buy Short Term Disability Insurance
Buy short term disability insurance before getting pregnant and create maternity leave pay for yourself, and added protection in case of complications, postpartum disorders, accidents, and illnesses. Short term disability pays a six week benefit for vaginal birth, and an eight week benefit for c-section delivery - less the elimination period.
Buy Hospital Indemnity Insurance
In the U.S. most babies are delivered in a hospital. Buying an insurance policy that pays a benefit directly to the insured upon hospital admission is another way to create maternity leave pay. Hospital indemnity insurance covers mom's admission to the hospital for normal labor and delivery. The benefit is paid directly to the insured regardless of what the underlying major medical insurance does or does not cover. The benefit for normal delivery may greatly exceed the premium paid, creating maternity leave pay.