Beginning Oct. 1, 2019, most Massachusetts employers will be required to make payroll withholdings on behalf of their workforce in compliance with the Paid Family and Medical Leave law. As the PFML contribution deadline nears, private carriers have emerged to provide alternative cost-saving solutions to the state’s plan.
If you are an employer with 25 or more W2 employees (Full Time & Part Time Included), you have the ability to price out a Private Paid Family & Medical Leave policy with a fully insured carrier prior to the 10/1/2019 deadline for contributions.
This is very important for a few reasons:
A private PFML policy will allow you to postpone the 10/1/19 contribution deadline, rather than pay the state the 0.75% up until 1/1/2021. This allows you to retain 15 months of cash flow internally within your organization. At 0.75% of total payroll that is an enormous cash flow win for your organization.
- State Plan: 10/1/19-12/31/20 – Employers will be sending 0.75% of payroll contributions (roughly evenly split between employee/employer) for the 15 months prior to 1/1/21 to the state to build claim reserve fund.
- Private Plan: 10/1/19-12/31/20 – Employers will be sending $0 to carrier/state; Contributions start when benefits start 1/1/21.
Ease Administrative Burden
If you have Short and Long-Term disability policies, you can proactively align yourself with a carrier so that on 1/1/2021, they will automatically make the necessary updates to your STD and LTD policies to integrate with the new state PFML benefits. With the state policy, updates will need to be made to in-force STD and LTD policies prior to 1/1/2021 to align correctly with the PFML benefits. Additionally, a private carrier will also handle all PMFL claims, rather than the state. The carrier can coordinate benefits and send claims to the correct parties and eliminate the need for you–as the employer–to make that determination.
- State Plan: Trying to coordinate benefits with in-force lines of coverage (Short- and Long-Term disability) will be a challenge as both employees and employers will need to understand how and where to file claims. Potential for 2 different claim forms filed in 2 different areas, confusion over who pays first, could they both pay, etc. Uncertainty surrounding processes as state needs to hire employees to handle claims, billing, etc.
- Private Plan: Administratively it makes sense to bundle PFML with other in-force disability policies to allow private carriers to handle coordination of benefits. One claim form and carrier adjudicates what policy pays based on policies in force; employer not making that determination.
With the state plan, there is a certain element of pricing uncertainty. With a private PFML plan, the pricing is determined by you and your employee population, giving you more control and transparency when it comes to pricing.
- State Plan: Pricing uncertainty; already had a contribution increase from 0.63% to 0.75%. NY State PFML plan just went up 103%. Being in the state pool comes with the risk of being grouped together with all other risk in the state; good, bad, indifferent. If it is abused by other people, your rate will be affected.
- Private Plan: Pricing is based on you and your employee population. Your organization has more control and transparency when it comes to pricing.
To be eligible for an exemption from making Paid Family and Medical Leave (PFML) contributions, you must offer an approved private plan with paid leave benefits that are equal to or more generous than those provided under the PFML program.
To learn more about the PFMLA, including information about how this new program impacts your organization, more background on exemptions, and details on contribution levels, please visit mass.gov/pfml. We want to be sure to present options and help you make an informed decision.
If you would like to obtain a quote for a Private PFML policy, please reach out to RogersGray for details.
Join RogersGray and our in-house PFML expert Jeff Bastien on September 25th for our seminar on the potential benefits of a Private PFML Policy.
Jeff will lead the discussion on the potential cash savings and administrative burden, and also address the current PFML environment and future stability, timelines for exemption applications, eligibility and employer responsibilities and an overall Q&A on the MA PFML.
Consultant | Employee Benefits
Jeff Bastien is an Employee Benefits Consultant at RogersGray Insurance. Jeff has been in the employee benefits industry for 10 years and is an expert in creating and implementing successful insurance offerings through progressive thinking and employee engagement. Jeff resides in Millbury with his wife Jennifer. You can connect with Jeff on LinkedIn or by email.