The Connecticut Office of Policy and Management is searching for a vendor who could analyze and model a complicated new taxation strategy that would replace part of the income tax with a payroll tax. If implemented, the new tax structure could result in employees seeing a pay reduction of 5 ...
Gov. Lamont says private insurance company could manage paid FMLA program
At an August 29 meeting of the Midstate Chamber of Commerce Breakfast Club, Gov. Ned Lamont said he wasn’t sure who would run Connecticut’s new paid family and medical leave program but that it could possibly be a private insurance company like The Hartford.
“We haven’t figured out exactly who is going to manage it yet, but it could be private like The Hartford or an entity like that, that does it,” Lamont said to attendees in response to a question regarding the hardships the program may cause small employers.
Connecticut’s new paid FMLA program was passed by the legislature and signed into law by Lamont in June of 2019. Beginning in 2021, the state of Connecticut will levy a .5 percent payroll tax on employees to fund the program, which will allow employees of any company with two or more employees to take up to 12 weeks of paid family or medical leave with pay up to roughly $900 per week.
According to the law, the program will be overseen by the Paid Family and Medical Leave Insurance Authority, governed by a 15-member board consisting of various state government commissioners and gubernatorial and legislative appointees who “shall establish and administer the Paid Family and Medical Leave Insurance Program” for covered employees.
But the authority will also have the ability to contract out for services to manage the program, which Lamont hinted at when he referenced The Hartford as possibly managing the paid FMLA program.
“His [Lamont’s] statement is consistent with the law,” said Max Reiss, Director of Communications for the governor’s office, in an email. “Public Act 19-25 empowers the authority to make and enter into contracts, including by issuing a request for proposals for claims processing, website and database development, marketing, and any other element of the program.”
According to the bill, the authority will develop criteria for evaluating contracts priced at over $500,000 based on transparency, cost, efficiency, quality, user experience, accountability and cost-benefit analysis.
While business and industry groups were largely opposed to the paid FMLA program, Lamont has tried to build bridges between state government and the private sector, at one point threatening to veto the paid FMLA legislation if it did not allow private companies to submit bids to service the program.
Initially, the paid FMLA was to be managed by the Connecticut Department of Labor, but Lamont pushed for a quasi-public authority.
The fiscal analysis of the bill did not account specifically for outside contractors to manage and administrate the program but did say if the authority contracts out for services, the costs may change.
The program is to be funded entirely by revenue raised through the employee payroll tax and any funds received by the authority from the General Fund will have to be paid back by 2022.
Start-up costs are estimated at $13.6 million with ongoing costs of $18.6 million per year to cover administrative and investment costs and fringe benefits for employees of the authority.
It is not known whether contracted services may replace the estimated yearly costs for staff or add expenses for the program.
Either way, the administrative costs for the program could affect the benefit paid to employees. The payroll deduction is capped at .5 percent, but the benefit payout can vary with the amount of money the FMLA trust fund has on hand from the previous year.
According to the bill analysis, “if contributions are at the maximum allowed rate and the authority determines that it is not enough to ensure the program’s solvency, the bill requires the authority to reduce benefits by the minimum amount needed to ensure the program’s solvency.”
Lamont said his support of paid FMLA came from his business experience and said that he was willing to work with businesses “if we have to fine-tune some things along the way.”
“I could not afford to lose a great employee to illness or pregnancy,” Lamont said. “The big guys were providing these benefits already. From my point of view, I had to make it easier for small business to be able to make sure that that employee did not have to choose between an illness or pregnancy and a job.”
Staggering employment numbers released by the Connecticut Department of Labor show that during the month of April, Connecticut lost twice as many jobs as it created in 10 years, putting the state back on its heels just when its economy was showing signs of life. The 2008 Recession saw a ...