Optimizing state paid leave administration 

The number of states with paid family and medical leave (PFML) programs has expanded significantly in the past five years. Today, mandatory programs are in place in 12 states, as well as Washington D.C. and Puerto Rico. Some form of voluntary program or incentive is in place in four states.

In a very short time, PFML has sprung to the forefront of employer concerns and is a major component of state legislative discussions. The expectation is that more states will enact PFML laws in the next few years. Currently, bills are pending in at least 16 states, including Missouri, Montana, Texas, North Dakota, South Dakota and Nebraska, addressing PFML mandates or voluntary programs.

The increase in number of PFML laws and the fact that these programs differ from state to state creates a complex web of compliance issues for private sector employers. Variety in cost, coverage, and eligibility is just the beginning.

For example, not all states allow approved private plans as an alternative to the state program. In those that do, a vote in favor of the private plan may be required by a majority of covered employees. In some states carriers don’t offer insured private plans even though permitted by law, because of financial restraints. Understandably, employers are concerned about how to manage these programs, particularly those looking to reduce costs and administrative burden while maintaining compliance and a uniform leave benefit program for a workforce in multiple states.

Costs and Benefit Considerations

There is no easy answer for managing these varied PFML obligations. However, a comparison of state versus private coverage is a good place to begin. While the cost of a state administered plan may appear less expensive, examining its impact on a more comprehensive basis could reveal that a private plan may be the better option, both administratively and financially.

Examine the data holistically. A comparative analysis provides visibility of the entire cost-benefit outcome for the employer.

A holistic data-driven analysis takes into consideration several factors, including:

• The cost to the employer to implement plans, including dedicated administrative staff.
• Time and expense of generating paperwork and wage information to administer plans, especially state plans.
• Employee equity in plan design.

Reliable and efficient administration is critical for managing complex PFML across multiple states. Offloading most of the responsibility to a carrier or TPA by way of a private plan is the best option for many multi-state employers. Using the same carrier or TPA across the board in as many jurisdictions as possible is likely to yield overall cost-savings, time savings, and more administrative control for the employer.

Private plans allow for easy coordination with other employer benefits, like short-term disability, bereavement leave, and parental and/or caregiver leave. Using the carrier or TPA as a single point of contact for coordinating these various benefits seamlessly is a convenience for both the employer and employee. There is some cost to working with vendors to support a private plan, as well as private plan application fees and surety bond or trust account requirements for self-insured plans. However, the benefits of a uniform or near-uniform leave benefit program with streamlined administration could far outweigh these costs.