Background: Colorado passed a paid family and medical leave bill in late 2020 which is better known as the Family and Medical Leave Insurance program (FAMLI). The program will be funded with a new payroll tax with contributions from both employers and employees that start 1/1/23.
Since the law was passed, Colorado employers have been anxiously awaiting rules governing the process for adopting private plans before premiums start being collected next year.
On July 29, 2022, the state’s FAMLI Division issued guidance outlining a temporary procedure for employers to opt out of the state program in 2023. While the formal rules still have not been announced, the new guidance will provide employers additional time to evaluate private plan options before the state plan becomes effective on January 1, 2024.
Under this framework, all covered employers must register with the Division’s MyFAMLI+ portal (expected to be available later this fall) and start paying premiums in January 2023. However, employers who adopt an approved private plan on or effective before January 1, 2024, will receive a refund of any premiums paid to the state in 2023.
Which employers must comply? Employers of all sizes with location(s) or employees working in CO.
Who pays for the new paid family and medical leave program? For employers with 10 or more employees, these “premiums” will initially be set at 0.9% of employees’ wages, with 0.45% paid by the employer and 0.45% paid by the employee.
Employers with less than 10 employees will be exempt from making the employer contributions, but their employees will still be required to pay 0.45% of wages.
Who will administer the program and benefits? The CO state Division of Family and Medical Leave insurance (DFMLI).
When are employees eligible to take the leave? Benefits will be available to employees beginning in 2024. It’s also important to note that employees that have worked for an employer for at least 180 days will be protected from termination during leave taken under the paid medical and family leave.
Can an employer opt out of the program by adopting a private plan with equivalent benefits? Yes, and guidance was just issued. Employers will have until 10/31/23 to apply for a private plan exemption. Once an employer’s private plan is approved, the FAMLI Division will reimburse the employer for any premiums paid in 2023, less the private plan administration fee. Those employers will no longer be required to submit premiums or wage reports to the state, but they must continue to maintain internal records related to the plan.
Summary:
Employers should work with their payroll provider to ensure the new payroll tax starts 1/1/23. Employers wishing to adopt a private plan and apply for an exemption should still set up the tax and pay accordingly until state approval is received. If approved, the state will refund premiums paid.
To learn more about the program benefits, click here.
