Maternity Benefits

Maternity Leave

In the United States, the federal government has intervened with the Family and Medical Leave Act (FMLA). According to this act, qualifying expectant parents can take up to twelve weeks of Maternity Leave without concern about losing their jobs. The FMLA does not make provisions for financing this leave. It is up the parents to use the following as a means of replacing lost income during maternity leave:

• Savings
• Paid sick or vacation time
• Loans

Canada Maternity Benefits, as established by the Canadian government, are much more generous with both the amount of time parents can take off from their jobs without fear of losing their jobs and with compensating new parents during maternity leave. Canadian citizens can qualify for up to 52 weeks of maternity leave and as much as 55 percent of their normal pay. The exact amount of leave and maternity benefits is based on the territory or providence in which they reside. Visit the HRSDC for more information.

Maternity Benefits and Insurance

Not all insurance policies are created equally. This is especially true if you or your spouse has recently changed jobs. Pregnancy is considered a pre-existing condition, and your new policy may have a waiting period before the insurance company will cover the cost of your pregnancy. Depending on the length of that waiting period, that could mean paying for the cost of childbirth out of your own pocket. If this happens, you do have a few options:

Consolidated Omnibus Budget Reconciliation Act (COBRA)

If you had insurance with your previous employer, you may be able to continue coverage under that policy through COBRA. Of course, you will now have to pay the full cost of policy, including the portion that your previous employer paid on your behalf.

Financial Planning

If COBRA is not an option, or your new employer’s insurance is significantly less expensive, it may be prudent to speak with a financial planner about investing a portion of your income each month, with the ultimate result being the payment of your pregnancy-related medical bills from your savings.

Flex Spending (Section 125)

Flex Spending, more commonly referred to as a Cafeteria Plan, may be a benefit offered through your employer. It allows you to have a portion of your salary set aside for medical costs before tax. In reality, this can mean if you set aside $100 a week, if might only reduce your take home pay by $70. The difference between the $100 and the $70 is your tax savings. Of course how much you will save depends on your personal tax bracket. As you accumulate medical costs, you turn in a reimbursement requisition to your employer, who will cut you a check for a portion of your flex spending savings.

One word of caution though, depending on how your employer has set up your Cafeteria Plan, you will need to carefully calculate your anticipated medical costs. This is because whatever funds you have taken out of your salary that you cannot provide current year medical receipts for reimbursement will not be returned to you. This means if you have $3,000 set aside and only turn in $1,000 in receipts, you will have lost $2,000 of your income; thereby negating any tax savings you may have gained.