Connecticut lawmakers consider payroll tax to fund family medical leave
Two bills that would tax workers in Connecticut to fund paid time off for family medical needs are working through the legislature, yet the proposals don’t say what the tax rate will be.
That important piece of information would be decided at a later date.
The proposals to create a paid family medical leave system in Connecticut passed out of the labor and public employees committee in a 7-6 vote on March 9 and may be heading to a vote in the legislature.
Senate Bill 1 and House Bill 6212 would create a state trust fund into which employees would pay a percentage of their income and be guaranteed 12 weeks of leave with pay up to $1,000 per week.
If passed during this session, the payroll deduction would begin before July of 2019 but employees would not be eligible for the paid family leave program until July of 2020. The payroll tax would apply to all employers with more than two employees. State workers will not be eligible for the program.
Exactly what percentage of pay an employee would have to contribute under the Connecticut system remains unclear and is not included in the current proposed legislation.
Under the 2016 Connecticut proposal, each employee would pay .5 percent of their income into the trust fund and then be guaranteed up to $1,000 per week for 12 weeks. But these numbers may not be able to support the program.
An employee making the state median income of $65,000 per year would only pay $325 into the fund but be guaranteed $12,000 per year in paid family leave under the Connecticut proposal.
A person making the median state income would be able to receive the full family leave benefit of $1,000 per week.
Based on these figures it would require 37 employees paying into the system to compensate for 1 employee that used Connecticut paid leave. The program could quickly become insolvent if more than 2.7 percent of Connecticut employees used the program per year.
In its analysis of the 2016 proposal, the nonpartisan Office of Fiscal Analysis estimated the state would have 53,500 claims per year, approximately 3.2 percent of Connecticut’s 1.6 million employee workforce.
But the costs of the program would not just be limited to a new employee payroll tax and family leave claims.
According to the OFA, the annual cost to administer the program would be $16.9 million with start-up costs of $5.9 million. According to the proposed law, any costs associated with creation of the trust fund would be paid back into the General Fund through the employee payroll tax.
There are currently four states – California, New Jersey, Rhode Island and New York – that have paid family leave laws, according to the National Council of State Legislatures. But the programs differ from state to state in the amount of leave time, how they are administered and the amount of weekly pay they cover.
Overall, based on the amount of leave time and the maximum pay, Connecticut’s paid family leave law would be the most generous in the nation.
All the programs are funded through an employee payroll tax that varies from a maximum of $31.50 per year in New Jersey to $998 per year in California in 2017. In California the employee contribution rate varies year to year based on the State Disability Insurance requirements.
The other states’ paid family leave benefits are also administered through the states’ existent disability insurance programs, rather than through a newly created state trust fund.
With the exception of California, Connecticut’s weekly pay cap would be the highest in the nation. California is capped at $1,173 per week, but only allows for a period of six weeks leave.
New York, whose paid family leave law will not begin until 2018, offers 8 weeks of leave. It also caps the benefit at $648 per week, 50 percent of the state’s average weekly pay. Paid leave time and compensation increases until 2021, when employees will be eligible to take 12 weeks family medical leave and $868 weekly pay.
The state of Washington passed a paid family leave law in 2007 but never implemented the program because they couldn’t find a way to pay for it. They are trying to resurrect the program this year.
The federal FMLA program stipulates that employees cannot lose their job for taking up to 12 weeks leave due to a family or medical issue. The leave is non-paid and employees generally use accumulated vacation or sick time as income during this period of leave.