Authors Toni Sorenson and Heather Hancz
This article is the second in a series. As we introduced in the first article, the Colorado Family and Medical Leave Insurance Program (FAMLI) is a voter-approved paid family leave program. The program is a social insurance program that allows covered employees to take paid leave from work for certain qualifying reasons. As employers, you have just over nine months to prepare to implement this program. By January 1, 2023, you must be set up to make employer contributions, take payroll deductions, and remit the premiums to the State.
Which Employers? FAMLI applies to all employers who employ two or more employees in Colorado. Employers who employ fewer than ten employees must remit 50% of the full premium contribution and may deduct that portion from an employee’s wages. Employers with ten or more employees will make the full contribution, half of which may come from the employee’s wages. Employers required to make the full contribution may choose to contribute the full premium on behalf of the employee (and not take wage deductions). As a general rule, employees’ wages are subject to premiums for all services performed within Colorado, whether or not the employer resides in Colorado.
How much is the contribution? Next, employers will need to establish premium liability by determining how much money needs to be contributed on behalf of the employee into the FAMLI fund. Remember that the amount is 0.9% of wages, to be shared equally by the employer and the employee if the organization has ten or more employees. It is important to deduct the full amount of the employee’s share from the employee when it is due. If an employer does not make the deduction on time, they cannot deduct it from a future paycheck.
Wages include:
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hourly or salary wages
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other compensation or benefits provided as compensation for services provided by employees
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tips and gratuities collected by the employer and distributed to the employee
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commissions, payments on a piecework basis, or bonuses earned for labor or services performed in accordance with the terms of any agreement between an employer and employee are also considered wages for purposes of calculating the premium.
Excluded from wages are mileage reimbursements and per diem payments; and the amounts of payments made by the employer on behalf of the employee into other insurance or annuity accounts not associated with FAMLI. The State website contains a calculator that is helpful to determine the total premium amount.
When do I need to pay the premium? Starting on January 1, 2023, premium payments will be made four times a year, no later than the last day of the month immediately following the end of the calendar quarter for which the premiums have accrued. Each payment must include all premiums for wages paid in all payroll periods that end within the calendar quarter.
What if I have a private plan? We expect to see private market plans that will offer similar benefits to employees for employers to purchase in place of the FAMLI program. Some employers will already have a short-term disability plan. The State is currently in the rule-making process to set the regulations for how employers can opt out of FAMLI by providing a private plan, including posting a surety bond. While we await the rules on that process, employers should consult their insurance professional to inquire about what makes sense for your business.
Does my employee handbook need to change? By the fall, all employers subject to FAMLI will want to amend their employee handbooks to provide information to their employees on the FAMLI program, or private STD, if that is how they will offer the benefit. Adopting clear language regarding what employees should expect will avoid miscommunications. The State has promised to publish suggested language that will explain payroll deductions to incorporate into your handbooks later this year. At that time, Employers Council will also publish sample handbook language. If you are a Consulting or Enterprise member, your membership includes a handbook review as part of that membership. Please send all handbook reviews to handbookreview@employerscouncil.org.
Do employers need to register for FAMLI? The Colorado Department of Labor and Employment will begin accepting registrations from employers in the fall. Any employer taking deductions and making premium payments will be required to register. Likewise, any employer opting to provide benefits through an STD will also need to apply for that exception with the FAMLI division and provide the required documentation. By the end of the year, if you are not utilizing an STD plan, you should be ready to make wage deductions, which begin on January 1, 2023.
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