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Authors Heather Hancz and Toni Sorenson

As many of our readers are well aware, Colorado’s new Family and Medical Leave Insurance Program (FAMLI) is a State-run family leave program that will begin to be funded by employers and employees on January 1, 2023. It will provide benefits to employees beginning January 1, 2024, for covered individuals to take up to 12 weeks of job-protected leave for certain personal and family medical reasons.

When the proposition was voted into law, it included a section allowing local government employers to opt out of the program entirely. Because there are still at least two rulemakings to be completed before the law comes into effect, and the Supreme Court is considering a challenge to the law in early May, there is still much we do not know about FAMLI. This article explains the opt-out clause for local governments and what we know about that topic to date.

Local governments, for purposes of FAMLI, means any county, city and county, city, or town, whether home rule or statutory, or any school district, special district, authority, or other political subdivision of the state.

Local governments have three choices when it comes to FAMLI. They can do nothing and participate in FAMLI; they can follow the process to opt out of the program entirely; or they may apply to the FAMLI division to provide a private plan as some private employers will do.

Participate (Opt in)

If a local government employer determines it will participate in FAMLI, then beginning January 1, 2023 the local government will begin to pay and remit the employer share of the FAMLI premium to the FAMLI division quarterly. The amount of the premium is 0.45% of wages if the local government has 10 or more employees and 0% of wages if the local government has fewer than 10 employees. The local government will also withhold each employee’s share of the premium, regardless of employer size, to the Division and remit employees’ share of the premium (0.45% of wages), along with wage data, to the FAMLI Division once a quarter. The FAMLI Division has stated this remittance program will look similar to the current platform for remitting unemployment premiums.

Decline Participation (Opt out)

To decline participation in the FAMLI program, the local government’s governing body must vote to do so. Local government employers must submit formal written notice to the FAMLI Division memorializing the decision by an affirmative vote of the local government’s governing body to decline participation in the program. The contents of the notice to the Division must include the date of the vote and a statement regarding the decision to decline participation in the FAMLI program. The declination vote does not take effect until at least 180 days after the vote, and it is this rule that has caused a lot of confusion as to when local governments need to host the vote to decline their participation in the program.

On the one hand, given that deductions need to start to be taken on January 1, 2023, and the vote to decline does not take effect for 180 days, it follows that the FAMLI Division would need to know 180 days before January 1 that the local government entity is not participating. It follows that the vote would need to occur 180 days before the law takes effect (which is right around July 1, 2022). However, the Division has specifically stated that a local government does NOT need to hold a vote by July of this year. This information was conveyed via an FAQ issued by the Division in the latest recorded webinar distributed on Friday, April 29. That statement has not been clarified, but it appears that the Division’s reasoning may be that the notice to the Division of the decision to opt out is distinct from the time the vote of the local government takes effect. Under the latter interpretation, local governments that do not notify the FAMLI Division of a vote to opt out by January 1, 2023, will be identified as participants in the FAMLI program, and the FAMLI Division will expect both wage data and premium payments due on April 1, 2023.

To avoid paying premiums, Employers Council advises local government employers to conduct the vote in 2022 and notify the Division ahead of January 1, 2023 (even though the effect of the vote is not active for 180 days). The Division, in its FAQ, suggested a date of December 1, 2022 for a determination of whether to opt out.

After a vote takes place, the local government is required to notify its employees of the declination vote within 30 days and give employees notice of the impact that declination in participation has on them. The local government employer must formally give notice to its employees, the content of which must: (1) explain differences between the FAMLI benefits and other paid leave plans offered by the local government; (2) state which employees are eligible for protection under FMLA; and (3) contain information for employees on electing benefits (participating in FAMLI) as an individual.

The decision to decline is good for eight years from the date of the vote. The local government must hold another vote if it wishes to continue opting out beyond eight years. A local government wishing to participate after any declination may consider and elect coverage annually.

A local government that declines participation may choose to assist employees who want to individually participate in the FAMLI program by facilitating voluntary payroll deductions, with remittance of the employee share of the premium (0.45% of wages) and wage data once a quarter to the FAMLI Division.

Local governments that choose to fully participate in FAMLI after previously voting to decline participation, as well as individuals who self-elect coverage, must remain in the program and agree to pay premiums for a minimum of three years. If a local government wishes to withdraw from the program at the end of the three-year period, the Division requires a minimum of 90-days’ notice, so the Division can update the systems to avoid overpayments and miscommunication.

Apply to Provide a Private Plan

Finally, an employer, including a local government employer, has the option to apply to the Division for approval to meet its FAMLI obligations with a private plan. There are no rules yet  publicly known on this topic, but at a minimum, a private plan must confer the same or greater benefits to an individual and otherwise meet the same requirements as the statute. Thus, any private plan, whether self-funded by the employer or purchased through a third-party insurance provider, must meet or exceed the benefits of FAMLI. That includes the eligibility to take leave, duration of leave, reasons for leave, wage replacement, and the cost to employees, which cannot be greater than the cost charged to employees under FAMLI. If the plan is paid by self-insurance (self-funded), the employer must furnish a bond to the State as security. Under this election, the Division can withdraw approval for a private plan when terms established by the Division have been violated.

We are awaiting more details on this new law and as they are released, look for another installment of our FAMLI series.

Employers Council is available to help members through online resources, consulting, and training. Contact the Member Experience team by email or call 800-884-1328.