Private Plan Rules Issued for Colorado’s Paid Family Leave

In November 2020, Colorado voters approved Proposition 118, the Paid Family and Medical Leave Insurance Act. The Act provides up to 12 weeks of paid family and medical leave with an additional four weeks of leave due to pregnancy related or childbirth related complications. While leave will not become available until January 1, 2024, funding begins January 1, 2023.

On November 1, 2022, the Division of Family and Medical Leave Insurance (FAMLI) adopted final rules that employers must follow if they wish to offer a private plan under Colorado’s Paid FAMLI Act.

As an alternative to contributing to the state plan, an employer may establish a private plan either by self-funding or through the purchase of insurance as described below.

Private plan requirements

An employer’s private plan must provide the same rights, protections, and benefits as the FAMLI program, including:

• Allowing paid leave for all purposes specified by FAMLI (to care for the employee’s child, to care for a serious health condition of the employee or employee’s family member, to take qualifying exigency leave, or to take safe leave);
• Providing leave for the same number of weeks as FAMLI (12 weeks, with an additional 4 weeks for pregnancy or childbirth complications);
• Providing a wage replacement rate and maximum weekly benefit no less than the amounts required by FAMLI (currently capped at $1100 per week);
• Allowing intermittent leave or a reduced schedule;
• Not imposing additional conditions or restrictions on benefits not authorized by FAMLI; and
• Providing a plan at a cost to employees no greater than what is charged to employees under FAMLI.

An employer’s private plan must be offered to all covered individuals employed by the employer.

Application requirements

An employer must submit a completed application to the Division and obtain approval prior to implementation of the private plan. The application shall include the employer’s federal EIN, name, business address, mailing address, designated contact person, copy of the private plan, and the $500 administration fee for applications received through 2024.

The private plan can be either self-insured or through a policy obtained through an insurer approved by the state.

A self-insured plan must also provide with the application a surety bond in an amount equal to one year of total premiums with payroll documentation supporting the surety bond calculation. Additionally, employers with approved self-insured plans must establish and maintain a separate account into which all employee contributions are kept and from which all benefits are paid.

If the application for the private plan is not approved, the Division shall notify the applicant in writing of any issues that must be addressed in order for the private plan application to be approved. The applicant may request to meet with the Division and the Division shall promptly schedule a meeting that is convenient for both parties.

Duration and Renewal

Approved private plans must take effect no earlier than 60 days after the application date to allow the Division time to review the application. Private plan approvals are good for eight years subject to renewal.

An employer seeking renewal of its private plan approval must submit an application for renewal at least 60 days before the expiration of the private plan approval. The employer must annually submit an attestation to the Division that the contact information is accurate, and the approved private plan continues to satisfy the requirements of the FAMLI Act and its implementing regulations.

All Colorado employers will begin paying premiums in 2023. Those who secure an approved private plan effective on or before January 1, 2024, may apply for a refund of paid 2023 premiums, minus the administration fee.

The deadline to submit a private plan application in order to receive a refund for 2023 premium payments is October 31, 2023.

Notice to employees

An employer must deliver to each of its employees a written notice of its election and approval by the Division to offer a private plan in lieu of participating in the state plan. The notice must be provided no later than 30 days before effective date of the approved plan or upon hire. The notice may be delivered electronically, in person or by mail.

In addition, an employer must post a notice containing the same information in a conspicuous and accessible place in the workplace. The notice must be in English, Spanish, and in any language that is the first language spoken by at least five percent of the employer’s Colorado workforce.

If the employer does not maintain a physical workplace, or an employee works remotely, the employer may satisfy the posting requirement by sending the notice via email or through a conspicuous posting in a web-based or app-based platform that the employee regularly uses.

Recordkeeping and reporting requirements

A private plan administrator must keep and maintain documentation of the following for a minimum of six years:

• Applications for benefits;
• Benefits paid, including payment dates and amounts;
• Adverse determinations of benefits applications;
• Internal appeals received;
• The outcome of internal appeals received; and
• Documents, including wage data, containing the information upon which benefits determinations were based.

An employer must keep and maintain, for a minimum of six years, records of any premium contributions it collected from employees.

For the first three years of an approved private plan, the private plan administrator must, on a quarterly basis, submit to the Division a private plan administration summary of the previous calendar quarter.

After an approved private plan has been effective for three years, the private plan administrator may submit its private plan administration summary annually, which will be due on January 30 of each year.

Termination of private plan

An employer may terminate its approved private plan by notifying the Division in writing at least 30 days before the voluntary termination’s effective date. Within 7 days of the effective date of termination of the private plan, the employer must notify Colorado employees of the termination and inform them that they are now under the state plan due to the termination.

After termination of the private plan, the employer must remain covered by the state plan and pay premiums to the state for a period of at least 3 years. If the employer returns to coverage under an approved private plan before the end of 3 years, the employer must pay to the state the amount of premiums it would have been required to remit through the remainder of the three-year period.

Tax guidance

At the time of this writing, the FAMLI website reflects guidance from the Colorado Department of Revenue regarding the FAMLI premium. The guidance indicates that FAMLI premiums are after-tax deductions that do not reduce an employee’s taxable income and employers should report such deductions on IRS form W-2 in Box 14, and list “FAMLI” as the label.

The FAMLI Division will issue IRS form 1099-G to each employee who receives FAMLI benefits, and the benefits paid will be reported in Box 1.

Employers will want to keep an eye on the Colorado Department of Revenue website.

Employer notice for Changes to Colorado Paid Family Leave

Employers are required to notify employees of the FAMLI program by posting the required 2023 program notice in a prominent location in the workplace by January 1, 2023.

The Division has available on its website a FAMLI toolkit for employers which includes additional resources such as a paycheck stuffer, FAMLI handbook and FAQs for an employer’s use in helping employees navigate the changes that begin in January.

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. This information is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. 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.