Miriam Webster's definition of the word "portable" refers to something that is able to be easily carried or moved. The dictionary defines "benefits" as something that produces good or helpful results or effects or that promotes wellbeing. It also defines it as a service (such as health insurance) or right (as to take vacation time) provided by an employer in addition to wages or salary. Pretty self-explanatory and easy to understand one might say. However, the term "portable benefits" is one that is a mystery to many, even in the benefits space – and making benefits permanently portable is something that lawmakers have been passing over time and time again.
The current system in place – one wherein key social safety net benefits such as health care, retirement, sick leave, parental leave, and more are tied to employment – was actually created in the 1940s. It started with the 1942 Stabilization Act, which was designed to limit employer's freedom to raise wages and thus compete on the basis of pay for scarce workers. However, the actual result of the act was that employers began to offer health benefits as incentives instead – and so began the modern era of employer-sponsored health insurance. The system continued to evolve in the 50s and 60s, with the creation of Medicare and Medicaid, but to this day, employer sponsored health care is the number one way that people in the U.S. get their coverage.
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But the way we work has drastically changed in the days since World War II. No longer are people working at the same company for 30-40 years, collecting their hard-earned pensions from that company and retiring. More often, we see people working multiple jobs, switching jobs often and, particularly since the pandemic, striking out on their own as freelancers, consultants, small business owners, and more. But our benefits system has barely changed.
For years, I have been advocating for a portable benefits system that decouples benefits from employment. A recent McKinsey survey found that almost 60 million Americans identify as independent workers – these are workers that are not getting benefits from an employer. And this population is only growing. It is projected that in 2027, almost 90 million Americans will be freelancing and they will make up just about 60% of the total U.S. workforce.
We need to address the challenges that this population of workers have when it comes to accessing benefits.
Health care
Health care is one of the number one challenges this worker population faces, despite it being quite affordable. In a recent Stride survey, nearly half (45%) of insured gig workers reported paying $0 in premiums in 2022, but more than half (58%) of uninsured gig workers said affordability is the reason they decided not to get coverage. And according to McKinsey, health care is the greatest perceived barrier to wellbeing for independent workers.
Establishing and shoring up the Affordable Care Act was the first step in making it easier and more accessible for this worker population to access health care. But more needs to be done. A system needs to be created wherein workers can find plans that are personalized for them – re: doctors, prescriptions, pre-existing conditions, etc. – and companies (or the companies they work with) could contribute. By decoupling health care from employment, we are creating an equal playing field for all workers to access the coverage that best fits their needs.
Retirement
Access to portable retirement accounts is one that would greatly benefit the self-employed workforce, however, it would also have drastic implications for the W2 economy as well. The Employee Benefit Research Institute (EBRI) estimates that each year about $1.35 trillion is left sitting in retirement accounts with previous employers. And in a recent survey of workers, 92% said they want their retirement plan to move from job to job with them.
Progress has started to take place when it comes to the portability of retirement accounts. Icon Savings Plan recently created a portable retirement product that moves with the worker, takes payroll contributions from the employees' paycheck and can be offered as a retirement benefit by companies. Efforts have also been made on the federal level. Senator Mark Warner joined with Rep. Jim Himes to propose the Portable Retirement and Investment Account (PRIA) Act of 2021. The proposal sought to create universal, portable retirement accounts at birth at the same time they receive a Social Security number.
Sick Leave
A good example of portability when it comes to sick leave is what the government did to protect all workers during the early days of the pandemic. The Families First Coronavirus Response Act, passed in March 2020, allowed self-employed workers who, due to COVID-19 were unable to work for reasons pertaining to their own health or a family member's health, to claim refundable tax credits to offset their federal income tax. The credits were equal to either their qualified sick leave or family leave equivalent amount, depending on circumstances.
Unfortunately, rather than building on this foundation to make these flexible options more permanent, a majority of these protections have since expired and we've gone back to forcing the self-employed workforce to navigate their own sick leave.
Parental Leave
Parental leave is hard to navigate as a W2 worker, let alone someone that works for themselves. Independent workers are not covered by the Family and Medical Leave Act, a law that allows employees to take unpaid, job-protected leave. On the state level, only a handful of states have enacted programs that offer paid family and medical leave coverage to freelancers – and many of them require a certain amount of time and buy-in from the independent workers before they can access the benefits. The need to change our parental leave policies in the U.S. is a widely debated topic given that it is the only industrialized nation that does not have a national program for paid parental leave. The issue? Paying for it.
It's unlikely that a solution for this is going to come to fruition anytime soon, however, ensuring that we continue to advocate for all workers to be eligible for leave versus just those that pay taxes through their employer is extremely important.
Creating a system for portable benefits is really quite simple – they are simply benefits attached to the individual employee, instead of the employer. The portability allows workers to take these benefits with them when they change jobs or become self-employed. The result? There are no financial losses or interruption of services from the benefits as a result of work and life change. Outlined above are some thought starters on how we can re-think and update some of our current practices. In the long run, a system like this would benefit millions of workers across the country – and lend itself to equal opportunities for both the employed and self-employed.
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