A 'pregnancy 401(k)': An alternative to paid parental leave?

Dive Brief:

  • The Independent Women's Forum, a right-leaning think tank in Washington, has released a number of policy proposals to accommodate women and families in the workplace. One suggestion that has garnered some attention: a "401(k) but for maternity leave," as the Washington Post reports. 
  • The IWF notes that they want to push forward alternative solutions to a discussion that has largely been dominated by Democrat progressive voices. They suggest that states could create Personal Care Accounts (PCAs) that potential parents could open to save up to $30,000 in tax-free savings over a lifetime. They could then access the money when taking FMLA leave or other allowed leave.
  • The Post notes that the proposal does not come without flaws. PCAs would likely not help women who couldn't afford to put more money back. Additionally, pregnancy tends to occur much earlier in life than retirement, giving workers much less time to accumulate funds.

Dive Insight:

As the discussion opens up about parental leave in the U.S., strategists and researchers from both sides of the aisle are seeking solutions to accommodate women of all backgrounds and incomes. IWF argues that their PCA plan would "take the burden off the employers," the Post reports, and "shield women from the social consequences of one-size-fits-all policies" like paid leave. 

IWF also cites research on Chile and Europe that found that women in countries that offer long maternity leaves tend to be promoted less often.

At a $5,000 annual cap, workers could store the equivalent of about 12 weeks pay per year and could only take the money once they are eligible for FMLA leave. Employers could also match, similar to 401(k) matching.

However, retirement fund leaders in the U.S. already struggle with the employee knowledge and savings gap and employees are increasingly stressed about their financial situations. It's likely such a plan would only work with employees who make enough money to feel comfortable saving and such employees may already work at firms that offer substantial paid leave plans.

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Filed Under: HR Management Comp & Benefits
Top image credit: Flickr; David J Laporte