Expanded TDI to cost workers

When 2013 began, business groups were talking about reforming and reining in Rhode Island’s Temporary Disability Insurance program – certainly not expanding it.
But expand it was just what the General Assembly did this month, voting to grant workers up to four weeks per year of paid leave through the fund to take care of sick family members or bond with a newborn baby.
The state-run temporary-disability-insurance program is funded through deductions from employee paychecks. To pay for the new benefits, the amount taken out each pay period is expected to rise from 1.2 percent to 1.4 percent of the first $61,400 in earnings, with no tax assessed for income above that amount.
For a worker making $40,000 per year, that would mean earnings paid into the TDI fund would rise from $480 annually to $560 annually. Someone making $30,000 per year would see the current $360 annual TDI deduction rise to $420.
Supporters of greater family leave say that’s a small price to pay to free workers from a choice between taking care of someone who is sick and quitting their job. They point out that most other developed countries provide some form of mandatory paid leave.
“This helps employee retention because companies don’t have to go out and hire a new employee if a family member runs into an emergency,” said Sen. Gayle Goldin, D-Providence, lead sponsor of the bill. “So many times people run into a crisis and have to leave their job, costing them and the business. This doesn’t cost the employer anything, but it means we do care about your work-life balance.”
Joining Goldin’s coalition in support of the bill was Daniel Gold, president of LNA Laser Technology in Pawtucket.
“The prestige of having the most family-friendly work environment in New England is a compelling incentive for families to stay in or make Rhode Island their home and help grow the economy at the same time,” Gold said in a statement supporting the We Care Rhode Island coalition that pushed for the TDI bill.
But much of the business community thinks mandatory paid family leave, and the chunk it will take from take-home pay, will make the state less attractive and ultimately harm the economy. Ken Block, president of Sympatico Software Systems and Moderate Party candidate for governor in 2014, sees that no matter what, every worker will see a tax increase, and for those making $61,400 or less per year, that increase will be 16 percent.
“It disadvantages our employees here versus across the border. In non-mandatory states, they will offer it as a benefit and the private insurance market is more than half the price.”
Block led a campaign by the Smaller Business Association of New England last winter to study the cost-effectiveness of Rhode Island’s TDI program and find out whether it was a target of abuse. He described expanding the program without studying it first as “mindless.”
The Rhode Island TDI program allows workers to receive payments equal to roughly 60 percent of their wages for up to 30 weeks per year if they are sick or injured. (The maximum benefit is $752 per week, so very high earners receive less than 60 percent.)
Block has cited the Rhode Island program’s higher use rates compared to New Jersey, one of five states with mandatory-temporary-disability insurance, as a sign the system is being exploited.
In New Jersey, 3.7 percent of the state’s 2.7 million eligible workers filed TDI claims in 2011, the last year figures were published, and the average amount of time they took off was 10.1 weeks.
In Rhode Island, approximately 8 percent of the 393,000-person workforce took time off under the program in 2011 based on initial claims that year, according to the R.I. Department of Labor and Training. The average leave taken in Rhode Island was 11.2 weeks in 2011, growing to 11.8 last year.
“Only one of two things can be surmised: Rhode Island either has the sickest workforce in the country or the program is being abused,” Block said. “Those people who go out of the workforce are not adding anything to their companies, and the program is taking discretionary spending out of the economy.”
With caregivers now eligible for the same TDI benefits, Block said he is sure some workers paying the increased rate into the system are going to make sure they get everything out of it they can. In addition, the 1.4 percent payroll deduction may increase if more employees decide to take advantage of the leave benefit. At the Greater Providence Chamber of Commerce, the caregiver-leave bill was a major late disappointment in a 2013 legislative session that had otherwise been relatively friendly to member interests.
Chamber President Laurie White said in addition to taking money out of the economy, expanded TDI represents an unnecessary government intrusion into the relationship between private companies and their employees.
“It’s a tax on employee wages first and presents a burden from the business community’s perspective in having to manage a workforce that now has increased eligibility for paid leave,” White said. “It is well-meaning, but the consequences could be rather widespread and severe.”
But Goldin said the concerns about benefit abuse and harm to the business climate are overblown.
Like DLT officials, she said comparing utilization rates between states is inexact because each program is different.
New Jersey, for example, allows companies to buy private disability insurance, while Rhode Island makes all employers use the state system.
When the TDI expansion goes into effect in January, Rhode Island will join New Jersey and California as the only states with mandatory caregiver and disability insurance.
On abuse, Goldin pointed to the fact that the caregiver bill increases penalties for those caught cheating the system and all benefits require signed documentation from a licensed health professional.
Ideally, Goldin said paid leave for caregivers and new parents would be required nationally, as they are in most other developed countries, but passing state laws first might be the best way to get there.
“Sometimes what we need is states to take action before it gets to the national level,” Goldin said. “Over 180 countries in the world have paid maternity leave and many have paid caregiver time that captures the other elements of what this does.” •

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2 COMMENTS

  1. This is just another example of the stupidity that brews in the general assembly. The expansion of an already used and abused social welfare program. It would actually take leadership with brains to audit and limit abuse to the program; lower expenses first and perhaps expand upon it later. But noooooo, in Rhode Island, we let the abuse and fraud continue, expand the program and jam another tax increase down the throats of the working stiffs! BRILLIANT!

  2. Yet another Tax and Spend idea by the GA to buy votes. This system is full of abuse as it is, so lets make it bigger because Bigger Government is best. Unbelievable!!!!! Keep voting the same people in and our plan to bankrupt the state will be complete.