“A Look Back”
in 2018, as part of the “Grand Bargain” legislation, Massachusetts officially introduced a Paid Family & Medical Leave (PFML) program. The compromise legislation created a permanent sales tax holiday, lay the framework for an increase to the state’s minimum wage over the next five years and create a new paid family and medical leave program in Massachusetts. As it related to the Paid Family & Medical Leave program, benefits will be starting in January 1, 2021.
The road getting to 2021 has come with its challenges right from the start. Deductions that were originally scheduled to have started July 1, 2019 were delayed to October 1, 2019 as the marketplace pushed back against legislators and asked for more time to prepare for what was to come. That delay also saw the rate increase from 0.63% of gross payroll for 18 months to 0.75% of payroll for 15 months.
We have seen the October 1, 2019 deadline pass with withholdings starting for many employers (primarily organizations with less than 25 employees). Meanwhile, a large population of employers with more than 25 employees went through the process of obtaining a Private Plan proposal and filing for an exemption from the state’s plan.
Private Plan exemptions have been granted to those employers that have chosen to go through the process of getting a customized private plan quote. The requirement for this was that the quote be specific to their organization and obtained from one of the approved carriers per the state Department of Family & Medical Leave website. An exemption via a private plan allow organizations to retain the 15 months of “ramp-up” contributions that would have otherwise been made from 10/1/19 through 1/1/21. That represents a significant savings for both the employees and the organization. An added benefit – organizations can also align Private PFML to their current disability benefits offering. This helps coordinate coverage for employees in the future and reduces administrative overhead.
Here are two private options from the approved carriers as a results of this process:
- Carriers underwriting organizations by giving them a custom PFML percentage based on a census of their employees today, with the understanding they will need to get a finalized quote before putting the plan into place in 2021. Some of these carriers require additional lines of coverage, and others will write the PFML stand alone.
Risks to Understand:
– While you can get a rate less than the state 0.75%, you could also end up with a higher rate.
– Your rates are not final rates and are subject to change if you have a significant population change.
- Carriers that are willing to match the state rate of 0.75% if organizations either already have business with the carrier or commit to writing one or more other lines of business bundled with the PFML benefit.
Risks to Understand:
– You do not know if the 0.75% is high or low based on your population; you could be over-paying.
– If you move your other lines of coverage to a different carrier, you will lose the 0.75% guaranteed rate and if you are a less desirable risk, you could end up paying more.
The deadline to file for an exemption for the 1st quarter contributions (Q4 2019) was December 20, 2019. Any employers that have not received their approved exemption will owe contributions for Q4 2019 at the end of January 2020. Those who have not received an exemption will still have the option to file for a Private Plan exemption for the next quarter’s contributions (Q1 2020).
In a nutshell, your decision to go private or not lies with these 2 parts of the regulation:1. Who do you want to pay for a PFML program AND 2. Who do you want administering the benefits? The state of Massachusetts or a private carrier?
“A Look Ahead”
There is still plenty to do for an organization in 2020 to help prepare you for 2021 when MA PFML starts. As we touched on, if you haven’t already, it is beneficial to explore the private option. Another area where we are going to start seeing pressure is Human Resources (HR). PFML is putting a spotlight on the operations for organization’s, as it is another regulation that could potentially be a target for employee’s discrimination lawsuits. Some employment attorneys we have consulted with are expecting these types of lawsuits to make a huge jump in 2021.
Here are some of the items you can review to see if they need to be addressed prior to 2021:
- HR Audit including:
- Best practices for handling employee issues
- Employee Handbook
- Job Descriptions
- Disciplinary Policies
- Pay Equity audit
- PTO and Leave Policy Reviews
- Technology options with Leave Management via private carriers
- Benefit Updates:
- Short-Term Disability – will need full update as PFML will end up taking over a large portion of STD benefits requiring a need to lower/cancel coverage (especially AFLAC/Colonial Benefits)
- Long-Term Disability – the waiting period needs to be updated as PFML benefits have a longer duration than the typical STD benefit that they will end up replacing
It is an excellent idea to add some of these items above to your HR agenda for 2020. Spending time now to assure that everything is in line will undoubtedly save time and energy (and potentially company dollars) when PFML starts in 2021 and employees begin requesting leave.
If there are any questions surrounding PFML in general, or any of the items discussed in this article, please feel free to reach out to me at 978-722-0206 or [email protected]
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.