Colorado Voters Pass Paid Family Medical Leave, So What’s Next?

Colorado voters recently approved Proposition 118, which is a new Paid Family and Medical Leave (PFML) program for Colorado.

What is Paid Family Leave?

First, paid leave is designed to cover employees who need to be away from work to take care of their own medical condition, those of family members, cases concerning birth or adoption, military leaves, and safe leaves. 

What PFML Looks Like in Colorado 

The plan was designed to cover practically all employees in Colorado. Anyone who has earned at least $2,500 in wages over the base period is eligible.  The base period is 4 out of the last 5 quarters.  Job protection is afforded for employees who have worked for the current employer for at least 180 days prior to receiving paid leave benefits.

To put this into perspective, an employee earning $12/hour and working 4 hours per week would qualify.

The plan will pay up to $1,100 per week, with the actual benefit being a percentage of the employee’s income.  It is designed to cover a higher percentage of first dollar income.  The plan will pay the employee 90% of the first 50% of the average weekly wage (which is currently $1,228 in Colorado).  The remaining benefit would be paid at 50%. You might need a calculator, but a person earning $1,000 per week would realize a weekly benefit of $745.40/week.

How Will We Pay for PFML in Colorado?

There is a cost to this new benefit, and it’s going to be shared by employers and employees.  The initial cost is 0.9% of income, which is split evenly between employers and employees.  There is an exemption for employers with fewer than 10 employees where the employer would be exempt from paying, but not the employees.  Remember, that employee count represents people eligible for PFML, not the traditional “full time” or “benefit eligible” headcount.

How Are Premiums Paid, and are Benefits Taxable?

The authors of Proposition 118 were very specific in noting that the CO PFML benefits would be funded by payroll-deducted premiums, and that the funding is specifically not a tax.  The authors also noted that the IRS would ultimately determine whether benefits would be subject to federal taxes.  They did exclude the CO PFML benefits from Colorado State tax considerations.

With that, the CO PFML benefits fall into a similar bucket as disability benefits. The PFML plan will be funded with payroll premium deductions.  That means businesses and employees will need to pay close attention to how premiums are paid.

Simply put, if premiums are paid with post-tax money, benefits paid are generally not taxable.  Premiums paid with pre-tax money create a tax obligation when benefits are eventually paid.

Remember that employers and employees will split the cost of the PFML premiums 50/50.  In most cases, the employer will pay their share as a regular business expense (pre-tax), which means that at least half of the PFML benefit will be taxable for the employee.  Whether or not the employee’s share is taxable will depend on whether or not the employee premium was paid with pre-tax or post-tax dollars.  If the deductions are done post-tax, the benefit would not be taxable.

How Does CO PFML Coordinate with Other Benefits Currently in Place?

Many employers already have benefits and leave policies in place to help employees in a time of need, such as STD, PTO, sick time, and FMLA.  So how will Colorado’s PFML coordinate with existing programs?

  • Sick days and PTO will still be needed for incidental absences.  PFML covers serious medical conditions for the employee and family members, generally defined as under the continued treatment by a medical professional.  Employees will still need sick time/PTO to cover incidental sick days and absences.
  • Not all income is replaced with PFML.  PFML pays a percentage of lost income, so employees won’t be making as much on leave than they would be if they were working.  As an example, a person earning $1,000 per week would realize a weekly benefit of $745.40/week – roughly 75% that they were making before.
  • Other benefits can supplement PFML to help make employees whole.  An employee could use accrued sick time, PTO, and STD benefits to supplement the PFML benefit, provided the aggregate replacement income does not exceed what they were earning before going on leave.
  • PFML covers a higher percentage of dollar-one income, but it’s capped, leaving higher-paid employees exposed.  Not all income is covered under CO PFML.  The plan will pay the employee 90% of the first 50% of the average weekly wage (which is currently $1,228 in Colorado).  The remaining benefit would be paid at 50%.  Employees who earn more than the plan covers would still need supplemental income benefits provided by STD or employer leave banks.
  • PFML won’t relieve businesses of FMLA, or other statutory responsibilities.  While CO PFML provides job protection for employees on leave, it does not replace FMLA. CO PFML would run concurrently with FMLA, and would need to be tracked separately.  Furthermore, the eligibility and qualifications for CO PFML and FMLA are very different.

Next Steps for Colorado Businesses

This is a new process, expense, and responsibility for almost every private employer in Colorado.  When you add this to the growing list of thinks HR needs to be focused on, such as FMLA, ADA, USERRA, or any of the 140+ state and local leaves across the country.  Add in existing STD and LTD benefits, and there is a ton of coordination, documentation, and information to be responsible for. Paid Family Medical Leave doesn’t just add a new benefit or law – it is something that will require existing plans to integrate with, which adds additional layers of complexity.

Fortunately for HR there are solutions that can help consolidate all of these responsibilities in one place. Disability insurance carriers have been managing leaves for decades, including claim intake, medical certifications, rehabilitation, return-to-work strategies, mental health support, and even vocational retraining. Many have successfully integrated FMLA and ADA leaves, and some are adding Paid Family and Medical Leave to their portfolios, which allow clients to focus on their business, rather than getting bogged down in forms, medical certifications, and compliance issues.

Employee benefit advisors are a great place for employers to turn for help in untangling the complex web of administering employee leaves, and helping employers stay informed and current on critical compliance issues.  Employers in Colorado will have some important milestones ahead in the next 2-3 years. The professionals that you have trusted for years are now able to answer many of the questions you have on Paid Family Medical Leave, and more. 

When Will PFML Benefits Start in Colorado?

PFML benefits will be available to Colorado workers on January 1, 2024. Employees and employers will need to begin paying for the program a year earlier – on January 1, 2023.  Employers will have the option of offering this through the State, or working with a private insurance carrier, presumably a carrier like their current disability insurance provider that can help manage multiple programs and leaves in one place.

Colorado Voters to Decide Future of Paid Family Leave in November Election

Paid Family Medical Leave is paid leave and job protection for employees to use in order to take care of themselves and/or family members, qualified military exigencies, and/or safe leaves (victim of assault, domestic abuse, etc.).

What is Proposition 118 – the Colorado Paid Family Medical Leave Initiative?

On August 25th, Secretary of State Jena Griswold announced that the proposed PFML measure had been certified for the 2020 ballot under the title of “Proposition 118 – Colorado Paid Medical and Family Leave Initiative”.  For the first time Colorado voters will get to choose whether a state-sponsored PFML program is right for Colorado employers and employees.

What is the history, and where are we today with PFML in Colorado?

In recent years the Colorado General Assembly has attempted to pass a state sponsored Paid Family Medical Leave (PFML) program.  Other states have adopted PFML programs in recent years (New York, Washington, Massachusetts, to name a few), and there are movements across the country to adopt similar programs in other states.  

The previous legislative measures in Colorado faced bipartisan opposition and have not been successful, and the most recent 2020 session saw the proposed legislation derailed in large part due to COVID-19.  Plan sponsors have since shifted gears, opting to move toward a ballot initiative rather than going the legislative route.  

Who is eligible for PFML benefits?

Any person who has earned at least $2,500 in wages over the base period is eligible. A base period is defined as 4 out of the last 5 quarters, so this would cover most any worker, even part-time workers.

What would the proposed Colorado Medical and Family Leave Initiative #283 cover?

Think of PFML as a hybrid STD and FMLA plan.  The plan would provide 12 weeks of paid, job protected leave (an additional 4 weeks for certain pregnancy/childbirth cases) to be used for:

  • Birth or adoption
  • Care for family member(s) with serious health conditions
  • One’s own serious health conditions
  • Qualified military exigency
  • Safe leave (victim of sexual assault, domestic violence or abuse, or stalking)

As other states have rolled out PFML programs we have seen the definition of “family” evolve as well.  Under the Colorado ballot measure, family is defined as children, parents, spouse, domestic partner, grandparents, grandchildren, siblings, and chosen family.  Chosen family is “any other individual with whom the covered individual has a significant personal bond that is or is like a family relationship, regardless of biological or legal relationship”.

What sort of benefit is available?

Get your calculators out… there really isn’t an easy way to explain this.  Simply put, the PFML program would cover a larger percentage of first dollar income, and then gradually grade down to cover less on a percentage basis over time. 

PFML would pay 90% of the first 50% of the average weekly wage (AWW), and 50% of the second 50% of the average weekly wage, up to a maximum weekly payout of $1,100. 

As an example, the current average weekly wage in Colorado is currently $1,227.  The first 50% of AWW is paid out at $552.15 (50% of the AAW is $613.50, which is paid at 90%).  The second half is paid out at 50% of the AAW, up to a maximum weekly payout of $1,100.

As an example, an employee earning $1,000 per week would receive $745.40 of benefit per week.

Employees are entitled to take up to 12 weeks of PFML per application year, with an additional 4 weeks available for employees with serious health conditions related to pregnancy or childbirth complications.  Employees may take their PFML leave all at once, or intermittently. 

How is PFML paid for?

Nothing is free, and that includes PFML.  The cost to fund and administer the program would be initially set at 0.9% of covered wages.  As an example, the cost for an employee earning $1,000 per week would be $9.00/week.

The cost would be shared between employers and employees, depending on the size of the business:

  • Employers with 10 or more employees would pay 50% of the premium, with employees covering the additional 50% through payroll deductions.
  • Employers with 10 or fewer employees would not need to fund the program, however, employees would be responsible for their 50% share of the premium through payroll deductions.

Premiums will begin to be paid in January 2023, and benefits start January 2024.

What options do employers have to provide PFML programs?

Earlier versions of the legislative proposals would have set up a single, state-run department to run the PFML program.  The current measure does require the Department of Labor and Employment create the division of “Family and Medical Leave Insurance” to administer the program and benefit plans.  For those who like the concept of private options, there is another way for employers to conform to the proposed law.

Employers may apply to the Division for approval to meet their obligations under the PFML plan through a private plan.  The private plan must confer all of the same rights, protections, and benefits provided by the state program.

Can employers and employees opt out of PFML requirements?

For most businesses who employ people, no.  That being said, local governments may opt out of the state PFML program.  Also, self-employed people, independent contractors, sole proprietors, partners or joint venture individuals may opt in for an initial period of not less than 3 years.

Are other provisions included in the measure?

Covered individuals who have been employed with their current employer for at least 180 days prior to filing their claim do have their job protected and restored to an equivalent position with equivalent benefits, pay and other terms and conditions of employment.

Employees are protected by law against retaliation or discrimination as a result of taking PFML.

The bottom line…

  • Colorado voters will decide on November 3, 2020 whether the Colorado Paid Medical and Family Leave Initiative will start in 2024.
  • If passed, employees and employers would share in the additional cost to fund and operate the program.  It’s important to note that the measure describes these as “payroll premiums”, rather than a tax. This is important for two reasons – first, since all employees and many employers would be paying for this it certainly feels like a tax; and if it is not legally determined to be a tax, any benefit received by employees could actually be considered taxable income.
  • Modeling done by the Common Sense Institute (link below) show that for $50,000 in wages, workers would pay $178-$425 in premiums, representing an 8% to 18% increase in state income tax on those wages.
  • The costs aren’t set in stone, at least for more than the first year.  The 0.9% of wage premium would be set through 12/31/2024.  Future premiums would be set by the Director of the Family and Medical Leave Insurance Program, but would not exceed 1.2% of wages.
  • Employers cannot require employees to use/exhaust PTO or sick time prior to filing for PFML benefits.
  • Existing disability insurance programs can remain in place, and may coordinate with, and/or supplement the PFML benefits.  While it would be possible that an employee could collect PFML, vacation, sick, and/or disability pay, they would not be able to receive an aggregate amount that exceeds their average weekly wage.
  • Employers face the prospect of yet another compliance and administrative burden, but they will have the option of working through the state directly, or customizing their own plan through private channels.

More information can be found at the Colorado Secretary of State website:  https://www.sos.state.co.us/pubs/newsRoom/pressReleases/2020/PR20200825Initiative283.html

Link to Common Sense Institute Study: https://commonsenseinstituteco.org/proposition-118-a-statewide-paid-family-and-medical-leave-program-for-colorado-but-at-what-cost/

Bridging the Communication Gap During Social Distancing – Part 2

How do we bridge the benefits communication gap during this era of social isolation and remote working? In Part 1 in my series on Benefits Technology, I explain why employees, employers, and brokers need it more than ever right now.

https://www.linkedin.com/embed/feed/update/urn:li:ugcPost:6653120368494067712

Bridging the Communication Gap During Social Distancing – Part 1

How do we bridge the benefits communication gap during this era of social isolation and remote working? In Part 1 in my series on Benefits Technology, I explain why employees, employers, and brokers need it more than ever right now.

https://www.linkedin.com/embed/feed/update/urn:li:ugcPost:6653120368494067712

Continuation and Reinstatement – Important Provisions for Employees during COVID-19

How can HR help employees maintain critical benefits during layoffs and furloughs? Continuation and Reinstatement are both helpful provisions to help employees – especially right now. Learn more here!

https://www.linkedin.com/embed/feed/update/urn:li:ugcPost:6649107301309431810

3 Ways That Using Data Can Change the Game For You This Year in Employee Benefits

In the movie Moneyball, we saw how a baseball team used analytics and evidence-based data to identify tendencies and create a competitive advantage against teams that spent far more money on big name ballplayers.  If it can be done in professional baseball – where the talent gap is often razor thin – then can it be used in the same way in building high-performing employee benefit plans?  You bet!

The simplicity of a marketing spreadsheet often masks the hidden costs of making ill-informed decisions on employee benefit plans. Not unlike any other purchase, those who lean on quality data, utilization reporting, and benchmark data will likely see a better return on their investment.  In the world of employee benefits, there are three keys to mapping out a cost-effective benefit program. 

  1. Understand your population with demographic data. Effective benefit planning is not a one-size-fits-all approach. Taking a close look at demographic data can help provide insights into what an employee population needs, what they value, and where an employer can make the best use of scarce benefit dollars.
  2. Understand what the other guys are doing. Everyone is interested in what their competition is up to – and the employee benefits business is no exception. Quality benchmark data can reveal strengths and weaknesses in benefit programs, and opportunities to either reduce operating costs, or leverage what you do well to recruit and retain the best employees.
  3. Networks are a number game! Most people won’t buy a car without knowing what mileage and maintenance costs are. Those “unknowns” can really add up! When clients review Dental and Vision plan options without considering the value of a strong, relevant network are not seeing the entire picture.  Carriers may have data and comparative reporting that can show value well beyond what they pay in premium each month. Often, a low-cost plan may have high out-of-pocket costs, with limited network pricing arrangements for clients to save money.  The bottom line: a high-performing network can help reduce out-of-pocket expense, improve client satisfaction, and reduce time spent negotiating out-of-network invoices.

Utilizing reliable data and analytics is a great way to differentiate, make smarter recommendations, and add greater value for your clients in 2017. Where can you access credible information to make this happen?  The information is out there, and many leading carriers can help provide data and guidance.  Just like the Oakland A’s created a winning solution on the field, you too can benefit from the use of data, analytics, and comparative reporting to change the game in 2017!

Passion fuels success

Many long-term projects require sustained mental and physical focus.  Without focus, it is difficult to get excited about the routine tasks necessary to complete a project.  That’s why we often set goals – to provide a target, an achievable benchmark, a destination.  Goals mean different things to different people, but those who create an emotional tie to their goals will achieve success more often than not – and that is passion.

I was visiting New York City for the very first time in early November 2012 for the New York Marathon.  That’s the year that Superstorm Sandy ravaged the East Coast, and the marathon was abruptly canceled 36 hours before the race was to start.  Without a marathon to run, I had a few extra days to be a tourist, and while many places in New York were closed, the Empire State Building was open for business.

The story of the construction of the Empire State Building is fascinating.  The art deco building, which was built in 1930, stood as the world’s tallest building for 40 years, and is still the fourth-tallest building in the United States.  Today it is the second-tallest building in New York City, running second to the One World Trade Center building.  What was fascinating to me was the story about how the Empire State Building was built – the passion of the people working the project, and the relatively short amount of time it took to complete.   

The construction project started in January 1930.  At the time, New York City had a few construction projects happening – all vying for the title of the “worlds tallest building”.  The Chrysler Building and 40 Wall Street had already started construction, so the Empire State crew was already behind schedule.  The entire team was passionate about winning the title, and they kept building at a frantic pace.  In fact, workers did not know how tall the building was going to be – that was kept a secret.  When all was said and done, the 3,400 workers built the world’s tallest building, 102 stories tall, and 1,454 feet high.  What is truly remarkable is that the entire project wrapped up in April of 1931 – exactly 410 days after they started excavating.  As a comparison, the One World Trade Center building took over 7 years to construct.  The building is now 85 years old, and still stands strong.

As the tour guide told the story of the building, I thought about how exciting it must have been to be on that construction team.  Going to work every day with the goal of completing the world’s tallest building – not to mention the competition between building crews in the City at the time – must have been thrilling.  That passion was transferable to every member of the team, and they achieved a mark that stood for almost half a century.

 We don’t always have the opportunity to build the tallest building in the world, but we do have the chance to link passion to our goals.  How can your life (or others) improve if you reached your goal?  Perhaps it is driven by money, health, fitness, or creating a better future for your family.  It makes the everyday task(s) of going to work, going to the gym, going to class, or simply jumping out of bed before the snooze alarm goes off that much easier.  Passion can make that a whole lot easier, and passion can help you reach new heights.