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Thousands of Employers Aren’t Paying New Paid Leave Tax. But How Many Should?

More than 8,000 Connecticut businesses registered with the state’s new paid leave agency but haven’t paid into the system, leaving state officials wondering how many registered unnecessarily—and how many will face penalties. 

Officials with the Connecticut Paid Leave Authority (CTPL) last week reported as part of “fund recovery efforts” that 8,255 employers had registered without making any payments. Many of these were “batch” registrants whose payroll service or other vendors registered them on their behalf, but the figure includes 2,674 businesses that went through the steps of registering with the agency’s online portal. 

Connecticut’s paid leave law, which took effect January 1, 2021, requires employers with at least one employee to deduct 0.5 percent from workers’ paychecks and remit the funds to the agency to cover employee claims. More than 123,000 businesses and organizations have registered. 

It’s not clear how many of the non-paying employers were supposed to make contributions. CTPL separately reported that a separate group of 160 employers were “non-compliant” during the last quarter of 2021 after they had made partial but incomplete payments. Some non-compliant companies have been identified by Aflac, the plan administrator, after workers have applied for benefits for which their employer hadn’t been paying in. 

Employers whose accounts are not current by March 31 will face penalties and interest on what’s owed, though it’s not clear CTPL can readily determine who owes how much. CTPL officials indicated they are working on differentiating between those employers who should be paying into the system and those who may have registered unnecessarily. 

The law has added to the regulatory red tape that employers must jump through to operate in Connecticut, creating a new tax they must collect and an additional agency they must interact with. 

Private-sector employers are by no way alone in struggling with the state’s new mandate. State agencies themselves were late in making the necessary payroll deductions because of software issues at the state comptroller’s office. (Unionized state workers were exempted from the program altogether). 

Meghan Portfolio

Meghan worked in the private sector for two decades in various roles in management, sales, and project management. She was an intern on a presidential campaign and field organizer in a governor’s race. Meghan, a Connecticut native, joined Yankee Institute in 2019 as the Development Manager. After two years with Yankee, she has moved into the policy space as Yankee’s Manager of Research and Analysis. When she isn’t keeping up with local and current news, she enjoys running–having completed seven marathons–and reading her way through Modern Library’s 100 Best Novels.

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