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January 8, 2019

New Laws in the Great Lakes State (article)

Employers in the state of Michigan should be aware to two new laws.  One requires employers to provide a paid sick leave benefit; and the other could impact an employer’s self-funded health benefit plan. Following is a summary of these new laws.

Michigan’s Paid Medical Leave Law

As mentioned in our October Benefit Beat, the state of Michigan was in the throes of enacting a paid sick leave law last year. It began as an earned sick leave ballot initiative, which was superseded by legislation passed in October, and then modified and enacted in December.  The Michigan Paid Medical Leave Act (S. B 1175, Act No. 369 of Public Acts of 2018) takes effect on April 1, 2019; the law allows employees to accrue one hour of paid medical leave for every 35 hours worked, up to 40 hours in a benefit year.

Affected Employers and Employees

Employers subject to the law include any person, firm, business, educational institution, nonprofit agency, corporation, limited liability company, government entity, or other entity who employs 50 or more individuals. The law does not apply to the federal government nor to any other state or a political subdivision of another state.

Generally, employees eligible for the benefit are nonexempt employees as defined by the Fair Labor Standards Act.  Employees ineligible for the benefit include exempt employees, those who do not work primarily in Michigan, temporary, seasonal, part-time, and variable hour workers, and private sector employees covered by a collective bargaining agreement, among others.

Accrual, Frontloading, and Carryover

An employee begins to accrue one hour of paid medical leave for every 35 hours worked on April 1, 2019, or his/her date of hire, whichever is later. An employee cannot accrue more than one hour of paid medical leave in a calendar week.   Alternatively, an employer is permitted to frontload a minimum of 40 hours of paid medical leave to an eligible employee at the beginning of a benefit year (defined as any consecutive 12-month period used by an employer to calculate an eligible employee’s benefits).  Paid medical leave can be prorated for employees hired during a benefit year. 

Employers can limit an employee’s accrual and use of paid medical leave to 40 hours per benefit year.  Employees are entitled to carryover up to 40 hours of paid medical leave to the next benefit year; however, frontloaded paid medical leave is not eligible for carryover.

Upon separation from employment, an employer is not required to provide compensation to an employee for accrued, unused paid medical leave.  Following a separation from employment, if the employee is rehired by the same employer, then any unused paid medical leave that was previously accumulated need not be reinstated.

Use of leave

An employee can begin using accrued paid medical leave following his/her 90th calendar day of employment.

Paid medical leave can be taken for one’s own needs, or to attend to the needs of a family member’s illness, injury, medical diagnosis or treatment, including preventative medical care. In addition, paid medical leave may be taken to obtain services or care as a result of domestic violence or sexual assault, or to care for a family member due to the closure of a school or business for public health or safety reasons.   For purposes of this law, family member includes:

  • A biological, adopted or foster child, stepchild or legal ward, or a child to whom the eligible employee stands in loco parentis;
  • A biological parent, foster parent, stepparent, or adoptive parent or a legal guardian of an eligible employee or an eligible employee’s spouse or an individual who stood in loco parentis when the eligible employee was a minor child;
  • An individual to whom the eligible employee is legally married under the laws of any state;
  • A grandparent;
  • A grandchild; and
  • A biological, foster, or adopted sibling.

Coordination with employer’s existing policy.  An employer is deemed in compliance with this law if it provides a minimum of 40 hours of paid leave to an eligible employee each benefit year.

Employee and Employer Notice Obligations

When requesting leave, an employee must comply with the employer’s usual and customary procedures relating to notification and documentation requirements for requesting a leave of absence.  Employees must be given at least 3 days to provide documentation supporting the need for leave.

Affected employers are required to display a poster at its place of business, in a conspicuous place that is accessible to eligible employees, containing the following information:

  1. The amount of paid medical leave required to be provided to eligible employees;
  2. The terms under which paid medical leave may be used; and
  3. The employee’s right to file a complaint.

Record keeping requirement.  An employer is required to retain records documenting the hours worked and paid medical leave taken by eligible employees for at least one year.

Enforcement

The Michigan Department of Licensing and Regulatory Affairs (http://www.michigan.gov/lara) enforces the provisions of this law, including complaints of violations and developing a model poster that could be used by employers.  Potential penalties range from a maximum $1,000 administrative fine for failure to provide the leave, to $100 for failure to display the workplace poster.

Repeal of Michigan’s Health Insurance Claims Assessment

In 2011, Michigan enacted a law intended to augment funds available for Medicaid expenditures by imposing the Health Insurance Claims Assessment (HICA) against insurers, third party administrators, excess stop loss insurers, as well as employers who self-administer its self-funded health plan.  This assessment equaling one percent of paid health claims is collected by the state’s Department of Treasury (DOT).  Affected entities are required to file returns and pay the required assessment for the preceding calendar quarter on April 30, July 30, October 30, and January 30 of each year.  

During the 2018 legislative session, a new law was enacted to repeal the HICA, and replace it with a new health care related tax levied on insurance providers.  The Insurance Provider Assessment Act (“IPAA”, Public Act 175 of 2018) was signed into law on June 11, 2018.  The effective date of this law was conditioned upon the Centers for Medicare and Medicaid Services (CMS) approving a waiver from certain federal provisions applicable to health care-related taxes.  CMS approved this waiver on December 10, 2018.  As a result, the IPAA took effect on October 1, 2018, and, likewise, the HICA is repealed as of that same date.

The DOT is currently developing guidance and notifying all impacted entities. The DOT indicates that affected insurance providers will be subject to prorated assessment in 2 quarters of 2019, based on the number of member months reported in 2017.  The assessment will be payable in two equal installments due January 31, 2019, and April 30, 2019. Beginning in 2019, the DOT plans to notify taxpayers of annual assessment amounts by June 15, which will then be payable in quarterly installments beginning July 30.

With regard to HICA liability for 2018, assessments will be computed on all “paid claims” prior to October 1, 2018.  While the final quarterly returns were due on October 31, 2018, the annual return filing is due on February 28, 2019.


The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

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