While the leave and benefits under the new Colorado Paid Family and Medical Leave Act (PFML) are not scheduled to begin until January 1, 2024, the state has already rolled out its first phases of PFML payments, meaning employers should begin planning for the new program now to prevent being unprepared at the start of the new year.
What to Know About Colorado PFML
In 2020, Colorado followed roughly a dozen other states and passed a paid family and medical leave program. Since then, the state has built a Paid Family and Medical Leave Insurance (FAMLI) program with the first phase having gone into effect on January 1, 2023.
Under the Act, eligible Colorado employees will be eligible to receive leave and wage replacement benefits if they are unable to work due to a serious medical condition. Prior to the PFML, Colorado employers were not required to provide family and medical leave unless they were subject to the Family Medical Leave Act, which only covers employers with 50 or more employees.
The Basics of PFML
Under Proposition 118, a system of 12 weeks of paid family and medical leave was established. The PFML is funded through a payroll tax that is paid by both employers and employers using an equal 50/50 split. However, employers have the option to pay more to allow their employees to pay less.
With the PFML, premiums will gradually increase, and the leave must be funded before any employee can take leave. Starting in 2023, employers and employers in Colorado will pay into PFML; however, the earliest that an employee can take advantage of this paid leave is January 1, 2024.
What Businesses Are Exempt from PFML?
Every employer in Colorado with at least one employee must abide by the PFML and do not have the choice to opt-out. Employers that offer their own paid leave program may apply for an exemption if their program is equal to or more generous than the benefits provided through Colorado’s Paid Family and Medical Leave Act.
Colorado is collecting .9% of payroll from all non-exempt companies. Employers have the choice to opt-out in favor of a private plan if they want to avoid defaulting to the state plan of .9%. Employers that would like to apply for an exemption must do so no later than October 31, 2023. Applications can be sent through the Colorado Department of Labor and Employment (CDLE).
Businesses Can Save 30% On PFML Payments With Private Insurers
Many business owners wonder if the PFML in Colorado will affect them financially in the long term. However, with private insurers, employers can expect to save upwards of 30 percent on PFML payments.
It is important to remember that employers that are considering a private plan are not exempt from paying PFML premiums until the private plan documentation has been reviewed and approved by the FAMLI Division.
Advantages of a Private Market PFML Plan
There are several key advantages to choosing a private market PFML plan, including the following:
- Seamless administration
- Affordability: Private plans often cost less than state options.
- Long-term rate stability: With more high-risk groups turning to state plans, companies that stick with private market PFML plans may see greater rate stability in the future.
- Faster claims turnaround: Private plans tend to pay much quicker compared to the state.
- Trusted advocate: Employers can rely on brokers to serve as their personal advisors and advocates for private PFML plan groups.
- Future tax refund: Companies can expect a tax refund for all pre-funded state .9% payroll tax paid this year.
How to Start Enrollment with a Private PFML Plan
All non-exempt Colorado employers must choose to participate in the state or private market PFML plan. If an employer does not want to allow the state to administer their plan for .9% of payroll, they must request a private market quote.
Colorado businesses must have registered through the My FAMLI+ Employer Portal prior to the first premium payments which were due on April 30, 2023. The portal is also where employers who want to offer a private plan can submit a request for exemption. Any employer who submits an exemption to enroll in a private plan is required to pay a nonrefundable $500 fee, and their exemption is valid for eight years.
Quoting Requirements for a Private PFML Plan
There are several quoting requirements to keep in mind for a private PFML plan. These include the following:
- Employee census, including first names, last names, DOBs, home zip codes, genders and salaries
- Employer address and SIC code
- Coverage is required for any part-time or full-time employee earning a minimum of $2,500 per year
Businesses are Struggling to Find a Great Private PFML Plan
While many employers in Colorado are looking toward a private PFML plan, finding a great one is no easy feat. Employers that opt for the private PFML plan route must ensure that the private plan insurance carrier meets all of the FAMLI requirements.
There are over 20 private insurers offering compliant PFML coverage in Colorado, but many carriers often require at least one other insurance line such as life insurance or long term disability to be written alongside the PFML in order to approve the coverage. That said, there are several competitive private insurers in the market willing to offer standalone coverage.
Historically Common Issues with Federal PFML Plans
Employers often encounter a variety of common issues with federal PFML plans, such as coverage issues. Some PFML plans only guarantee time off for certain groups, such as new parents, with more limited rules on medical care and family leave. The duration of the leave can also be problematic, with many federal PFML plans capping the amount of time to 12 weeks or less.
Other common issues include determining how much employees should be paid while on leave, and whether employees should have guaranteed job protection upon leaving. Finally, challenges often occur when it comes to how the program will be paid for, and whether employers, employees, or both should contribute.
Unique Challenges for Multi-State Employers
Employers that operate in multiple states often face the biggest challenges when it comes to PFML policies since there are no federal guidelines and each state carries its own unique rules and regulations.
As each state now is implementing their own leave policies, HR teams overseeing employees in multiple states will have their hands full managing the different policies and procedures in each location.
Speak with New City and Find a Private PFML Plan that Works with Your Business
With all Colorado employers now subject to new paid family and medical leave insurance obligations, it is important to understand how this program works and what steps to take to prepare.
Finding a great private PFML plan is key to saving money and ensuring optimal coverage for your employees. Speak with the experts at New City Insurance today to find a private PFML that works with your business.