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How the American Families Plan Could Change Paid Leave Requirements

How the American Families Plan Could Change Paid Leave Requirements

The Biden administration recently announced a new proposal that could reshape paid leave requirements for American employers. Dubbed the American Families Plan (AFP), this new policy promises to create a paid family and medical leave program for workers, among other key changes designed to support parents and women in particular.

Find out how the American Families Plan could impact small and mid-sized businesses if signed into law.


What is the American Families Plan (AFP)?

Announced in late April 2021, the American Families Plan (AFP) is a new policy proposal issued by the White House that plans to expand certain economic benefits for working parents and their children. The proposed investments include: 

    1. Add at Least Four Years of Free Education: The plan will invest in early childhood education by offering universal, free preschool to all 3- and 4-year-old children. It will also provide Americans with two years of free community college and make investments that lower the costs for low- and middle-income students to attend college. 
    2. Extend Tax Cuts that Benefits Lower- and Middle-Income Workers and Families: The proposal promises to extend the tax cuts included in the American Rescue Plan Act (ARPA), including the expanded child tax credit (CTC), the dependent care tax credit increase, and more.  
    3. Implement New Paid Leave Program: The comprehensive and universal system would allow workers to take the time off needed to better manage the health of their families.

More broadly speaking, the AFP is part of the Biden administration’s approach to reshape and recharge the American economy. Other policy proposals like ARPA and the American Jobs Plan are designed to inject trillions of dollars into the U.S. system, from private industry to federal systems and more.

The proposed goal? To prepare American workers, families, industries, and infrastructure for the future.


What Are the Current Paid Family and Medical Leave Requirements for American Employers?

Paid family leave is a type of employee leave where an extended period of absence granted to employees by employers—typically for the birth of a child or illness—and wages are either fully or partially paid. A handful of states mandate these benefits for employees, and on a federal level, the Family and Medical Leave Act (FMLA) requires up to 12 weeks of unpaid, job-protected leave for certain employees.

However, currently, there is no federal legislation in the United States that requires private employers to offer partial or fully financially reimbursed leave. (Paid family leave is available for federal employees.)

The White House fact sheet points out that the lack of a universal paid leave program limits the number of women participating in America’s labor force. And, because the U.S. doesn’t guarantee paid leave, nearly 25% of mothers return to work within two weeks of giving birth and 20% of retirees leave or are forced to leave the workforce earlier than planned to take care of a sick family member. Similarly, almost 80% of private-sector employees don’t have access to paid leave.


Paid Leave Requirements Proposed by the American Families Plan (AFP)

The White House announced that the AFP would create a national, federally funded paid family and medical leave program that would ensure workers could receive partial wage replacement to take time off for the following circumstances: 

  1. The birth or adoption of a new child 
  2. To care for a seriously ill loved one
  3. To deal with a loved one’s military deployment
  4. To find safety from sexual assault, stalking, or domestic violence
  5. To heal from serious illness
  6. To grieve the loss of a loved one

According to the Biden administration, the program will guarantee 12 weeks of paid parental, family, and personal illness/safety leave by the tenth year of the program. It will also provide up to $4,000 per month to workers who take this leave, with a minimum of two-thirds of their average weekly wages replaced (and up to 80% for the lowest-wage workers).

Employees would also receive three days of bereavement leave each year beginning in the first year of the plan.


How the American Families Plan (AFP) Will Be Funded

SHRM reports that President Biden’s plan would be financed by increasing the federal income tax “for the top 1% of American income earners from 37% to 39.6%.” It also plans to raise the capital gains and dividend tax rates for people who earn more than $1 million per year, as well as cut some exceptions in the federal estate tax. 

The White House estimates the federally funded program will cost $225 billion over the course of a decade.


How New Paid Leave Requirements Could Impact Small and Mid-Sized Organizations

If the plan is signed into law, small and mid-sized employers can likely expect compliance changes to payroll and time-off procedures:

  1. Payroll: Because the paid leave program would be federally funded, the government will need to collaborate with employers around the country to ensure that employees’ time-off wages are reimbursed quickly and efficiently.
  2. Time-Off Procedures: Employers may be required to develop new systems (or restructure existing systems) to track the paid leave hours that employees take each pay period.

Ultimately, however, employers should keep track of this legislation, as the AFP could dramatically change the country’s approach to taking time off for family and medical needs.

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