Blog by Sumana Harihareswara, Changeset founder

24 Nov 2021, 9:48 a.m.

Health Insurance & Retirement Plans For Open Source Maintainers

This is huge.

The Open Collective Foundation has just announced: "OCF now offers employment options to initiative workers—with health insurance!" As that page says: "Initiatives fiscally hosted by OCF can have employees, with access to benefits like health insurance. Costs related to employment are paid from the initiative's budget, with OCF as the employer." (Employees must be based in the US.) And through the OCF's benefits provider, employees can also opt into 401(k) retirement savings plans.

This is such a huge step forward for open source sustainability, in particular for projects with key contributors in the United States. Let's talk about why!

Contents:

  1. Open source and fiscal hosts
  2. The United States, employment, retirement, and health care
  3. What you can now do via OpenCollective
  4. What this unlocks

Open source and fiscal hosts

A "fiscal host" is a nonprofit organization that helps out charitable endeavors by giving them certain kinds of legal and financial infrastructure and services. Here's why they exist:

If you start a mutual aid food pantry in your neighborhood, or a meditation meetup that turns into a real community, or an open source software project, eventually you'll likely need to find ways to take in and spend money without having everything go through one person's personal bank account/PayPal/Venmo. And sometimes you need a trademark to protect people against imitators, or you'd like for the domain name and the fridges and the storage unit to actually be held by the group and not just the founder.

In the United States, this means creating or getting help from a "legal entity" -- a corporation or some other organization that is registered with the government. And if you want to ask for donations or apply for grant funding, people often expect or require that your organization is a registered charity, often referred to as a "501(c)3", which means that donors can deduct their donations from the yearly taxes they pay.

It is hard and annoying to set up a 501(c)3 organization! You probably need to pay a lawyer and accountant to do bits of startup paperwork, appoint a board of trustees and have regular meetings, and so on. Sometimes this burden is way more than volunteers want to take on -- and if you mess up the recordkeeping and fall behind in tax filings, it's a real headache to catch up.

So some nonprofit organizations offer "fiscal host" (also known as "fiscal sponsor") services. Just like it's a big pain to set up your own datacenter and so a lot of people instead rent server time from Amazon Web Services or Heroku, a lot of small projects get a membership with a fiscal host to get access to legal and financial infrastructure. In this analogy it's like getting a dorm room instead of building a stately manor. The fiscal host covers its own costs by taking a percentage of donations given to member projects.

In the arts, a popular fiscal host is Fractured Atlas. In open source software, you'll see NumFOCUS, Software Freedom Conservancy, and others.

Open Collective is particularly interesting here because its fiscal host service is fairly turnkey -- the application process is pretty streamlined -- and because a fiscal host within it, Open Source Collective, serves as fiscal host to nearly three thousand open source software projects. I would be surprised if there's another fiscal host out there that supports more.

The United States, employment, retirement, and health care

Your open source software project, once you're set up as a member project at a fiscal host, can now receive and spend funds. Great! So you can register domains, buy AWS credits and laptops and plane tickets, pay contractors...

Right, yes, you can compensate people for their labor, but in the US, the way you compensate them gets complicated. Because it's fairly easy to hire someone as a contractor ("freelancer"), but hard to hire them as an employee. And to talk about the difference I need to talk about how weird the United States is. In short: being hired as a "full-time" employee (usually at least 30 hours of work per week) usually gets a knowledge worker (such as a programmer) a lot of concrete benefits that would be unavailable, inconvenient, or more expensive if they were hired as a contractor, in particular concerning health care and saving for retirement. If you've been in the US workforce for several years you can probably skip this.

The United States, compared to approximately all other countries that have its level of wealth and infrastructure and so on, is completely strange and deficient in how we deal with healthcare and retirement-type care for senior citizens. A lot of this stuff is tied to employment here.

First: retirement. (I'll cover it first because healthcare will take longer.) How are people in the US supposed to support themselves after they stop working? Through a patchwork combination of stuff.

  • You can save and invest "normally" in bank accounts, real estate,* securities, and so on.
  • Some people get pensions (the employer keeps paying them after they retire) but far less than half the workforce can count on this, for various reasons.
  • Since 1935, we've had the Social Security program. Starting in one's 60s, almost every US worker is eligible for Social Security payments, and you get more if you earned more during your working lifetime. Some people can also get Supplemental Security Income. Many politicians scare voters by saying that Social Security is in crisis and that you will not be able to depend on it actually paying you any money by the time you retire.
  • Since the 1980s, under Internal Revenue Code Section 401(k), there's a special kind of account called a "401(k)" where a person can make contributions to be saved/invested towards retirement. An employer can sweeten the deal by "matching" your contributions up to some amount, such as $5,000 per year. A 401(k) must be employer-sponsored -- that is, you can't do it just by yourself -- and you usually only get access to 401(k) benefits if you are a full-time employee. But there are alternatives called Individual Retirement Accounts which a person can create independently. It's a bit complicated but, when changing jobs, one can often "roll over" a 401(k) from one employer to another so that you have one big growing account rather than a bunch of little ones. The money in a 401(k) or IRA account gets invested in a securities portfolio; the accountholder gets to make some choices about what to invest in. You and your employer contribute the money "pre-tax" (it's deducted from your taxable income, so you pay lower income taxes) and you can't withdraw money, till you retire, without paying tax on that withdrawal -- but there's often a one-time tax exemption where you can take money out to use when buying a home.

That last item, sponsorship for 401(k)-type account and possibly some employer matching for contributions, is basically what a knowledge worker in the US now expects as a part of an employment benefit package. (And I don't love it! I don't love being handed a bunch of poker chips and directed to the casino that is Wall Street and told: go invest your retirement savings! You're in charge!** But that's the current state of play.) If no organization is your employer, then you have to do a bunch of workarounds to get a similar means of saving for retirement, and you miss out on the possibility of employer-matched contributions.

And then there's healthcare. How are US residents supposed to pay for doctor visits, medicines, and so on?

This gets super complicated as you can tell by just skimming the table of contents for the English Wikipedia entry on "Health insurance in the United States". But to painfully summarize: instead of paying out-of-pocket for medical stuff, most people have a health insurance policy, and their health insurer decrees what is approved and what's not, what bills the individual has to pay, etc. And insurance companies negotiate down the rates for what they pay for stuff, compared to the "standard"/"out of pocket" rate, so uninsured people -- generally least able to afford healthcare! -- actually get the highest bills! The main ways people get health insurance in the US:

It's way too complicated! Even people eligible for government-subsidized insurance often don't know how to get it! "More Than 6 in 10 of the Remaining 27.4 Million Uninsured People in the U.S. are Eligible for Subsidized ACA Marketplace Coverage, Medicaid or the Children’s Health Insurance Program"! Costs have gone way up because for-profit insurers came into the industry and started raising premiums! We spend way more per person on health care than in other comparable countries and the quality and speed of care we get is less! And even insured people end up with huge medical bills -- medical bills are the number one cause of people in the US going bankrupt, which means selling or liquidating all your assets to pay your creditors!

And I haven't even gotten into the huge pain of choosing or changing health insurers and policies! Any given doctor, hospital, procedure, or medication may be covered by some health insurance policies but not others, and it can be tedious or even impossible to find out ahead of time whether a particular insurer will cover something! If you switch insurers, you'll sometimes have to find a new general practitioner or specialist! If your GP or a specialist stops taking your insurance then you have to scramble to find a new one! (Yes, this includes mental health practitioners!) This is particularly awful in rural areas with few doctors, or places where the only health facility around is affiliated with a religion that prohibits care that you need!

There's nearly a century of politics I haven't gotten into here -- the main thing to understand is that middle-class people in the United States are, reasonably, pretty scared of being really poor during our final years, or of being ill and really poor due to huge medical bills (which is way more likely if you don't have health insurance). And the main way we protect ourselves against those outcomes is by getting employed someplace that will give us employer-sponsored health insurance coverage and a 401(k) account.

If you make your wages as a contractor instead of as an employee, then it's harder and more tedious and more error-prone and more expensive to arrange for health insurance coverage and retirement savings. And you're less protected against changes in health insurance costs and thus against the headache of switching insurers. This basically is also true if you run a tiny business and are self-employed. And the precarity is particularly scary if you're disabled, or if your spouse or child has expensive health needs.

And so: if an organization wants to hire someone, to compensate them for labor, some people will only do it as an employee, not as a contractor.

But it's tedious and expensive to get set up to employ someone and give them those benefits, and to fund and administer those benefits on an ongoing basis! In contrast, there's very little paperwork needed to pay someone as a contractor. And that brings us back to open source projects....

What you can now do via OpenCollective

Thus: In the United States, the need for reliable health care and health insurance causes a tremendous number of open source contributors to have to take full-time jobs with employers. Sometimes these employers hired them to work on their open source projects, but more often, they're working either 0% or a very small percent of the time on open source, and they're working most of the time on proprietary software. So they squeeze in open source maintenance work during vacations, nights, and weekends.

A big focus in open source sustainability right now is finding ways to pay the maintainers. Instead of maintainers scrambling for nights-and-weekends spare time to maintain software, we should get them wages that would enable them to spend their core labor hours on open source maintenance. And though some companies and academic institutions are interested in employing particular maintainers full-time, it's probably more resilient if projects can take in relatively smaller donation streams from many sources, and combine them to hire maintainers.

But all the fiscal hosts and similar services I'm aware of that serve open source projects -- until now -- only let you pay contractors, not employees. They did not, until now, help member projects get employee-level benefits for individual laborers.

Until now.

Now, an open source project fiscally hosted by OpenCollective "can have employees, with access to benefits like health insurance. Costs related to employment are paid from the initiative's budget, with OCF as the employer." Employees must be based in the US. They're using Justworks, a company that helps small businesses provide employment benefits. In particular: 401(k) retirement plans and health insurance coverage.

So your open source project can gather donations via the OpenCollective platform, then use them to hire a US-based employee -- who reports to the project as a whole, not just one company, yet gets the benefits and at least some of the stability of a traditional employee.

Open source maintainers in the US now have substantially greater freedom to leave their jobs, go independent, and still protect their health and their future.

What this unlocks

Look at what's already happening with people who don't have to worry as much about health insurance. Check out Freexian, which is an effort where Debian developers club together and get sponsorship money, so they can each spend a certain number of hours each month consulting on really important parts of Debian software and infrastructure. A lot of those people who can take advantage of that are in Europe, or are in other places where health care isn't in question. So they can choose contracting work (or switch back and forth between full time employment and consulting, or combine flexible contracting with a stable part-time job) a lot more easily.

So now this possibility opens up more to US-based open source maintainers. We can better crowdfund and recruit US-based programmers and other workers to work on under-produced under-supported infrastructure, like Debian, or autoconf, or various glue libraries.

All the stuff we've been trying to do with grants, Tidelift, GitHub Sponsors, and similar initiatives: they're more likely to succeed, because more people -- both existing maintainers and apprentices willing to learn -- will be available to hire. If you run a program like Django Fellows, where you pay contractors to support the project through community management and code review, you can now expand your candidate pool and recruit US workers who want to work as employees.

And! we can better crowdfund and support innovative research, possibly in directions that big companies don't love. Indeed, we can better invest in FLOSS software that has no commercial competitor, or whose commercial competitors are much worse, because for-profit companies would be far warier of liability or other legal issues surrounding the project, such as youtube-dl.

More generally: any given open source software project that has a substantial user base now has a better chance at being able to hire one of its US contributors to provide ongoing maintenance and support. And so more projects will be able to sustain themselves with user support, instead of burning out unpaid volunteers and stagnating to a crawl and then a halt.

Some of this I'm basically copying and pasting from the "what if we had universal healthcare" section of my talk "What Would Open Source Look Like If It Were Healthy?" Because this is, potentially, a huge step for the health of open source.

I do consulting to help open source software projects get unstuck. Sometimes I advise them on which fiscal host or funding platform might suit their needs. The advice to get set up on OpenCollective has just gotten more attractive, and I hope other startups and nonprofits in the space pay attention. Adding this benefit to more fiscal hosting or funding services would be a tangible and significant way to improve open source contributors' freedom.


* There are a bunch of strange financial and tax advantages to buying a home, so one way people save for retirement is by buying a home, so they'll own it free and clear after retiring and won't need to pay housing expenses. When we say "buy" we usually mean "pay an initial payment called a 'down payment' to the seller, take out a loan called a 'mortgage,' move into the home, and gradually pay off the mortgage over 30 years." Yes, 30 specifically. Employers who want their benefits packages to help with this aspect of retirement planning might offer -- as Electronic Frontier Foundation does -- interest-free second mortgage loans for up to a portion or percentage of a home's price.

** Daniel Davies talks about pension "reform" in case you want some more thoughts.

Comments

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