Wednesday, June 19, 2013

State Maternity Leave Benefits - Who Are the Winners and Losers?

Collecting state maternity leave benefits is a hit or miss proposition. Many women assume that the federal or state government will automatically provide at least some level of maternity leave pay when they deliver their baby. In the U.S. government sponsored maternity leave benefits are the exception rather than the rule. There is no federal government program, and only five states have mandated short term disability programs in place. And some of those programs fall woefully short. Women working in one of the forty five states with no mandated state programs have to plan ahead, and find the right coverage before getting pregnant.

Many European countries mandate a significant level of paid maternity leave benefits. Not so in the United States. There is the Federal Family Medical Leave Act (FMLA), which provides unpaid job leave protection for women during maternity leave. But of course "unpaid" means there is no income replacement whatsoever. Five states have state mandated short term disability insurance which pays a benefit for a normal maternity leave: California, Hawaii, New Jersey, New York, and Rhode Island. That leaves forty five states with no paid maternity leave coverage at all.

If you live in one of the states with mandated coverage consider yourself lucky - up to a point. The state programs provide a minimal amount of coverage, and it may not suffice for many women. The New York state disability program illustrates this best. New York has one of the country's highest cost of living, and along with that comes the highest per capita income level. This is especially true in New York City. The New York state disability program replaces up to fifty percent of income, and caps out at $170 per week. The $170 per week cap represents fifty percent income replacement for a woman earning $17,680 annually.

For a state with very high incomes, the NY level of income replacement is nominal. A couple might be able to get by as long as everyone is healthy, and mom can return to work right away. But what will happen if mom needs to leave work before her delivery, or experiences delivery complications, or has an accident, or get sick?

And what about the women in the forty five states with no mandated state coverage at all? The same questions apply as well. If they work for an employer who provides paid maternity benefits - great. But this represents a very small minority. Some may be lucky enough to work where there is a company subsidized group short term disability program that will protect them while they work for that particular employer. Others may be lucky enough to have a voluntary short term disability option which they can pay by payroll deduction, and take with them if they leave the employer.

The largest segment has none of these options. Fortunately, they can purchase individual short term disability that covers pregnancy and maternity leave. Provided they purchase a policy before getting pregnant, an individual short term disability insurance policy will cover their normal labor and delivery - creating maternity leave pay.

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