Beginning in 2019, businesses in Washington state will owe a 0.4% quarterly wage assessment to fund the state's new paid family and medical leave (PFML) program. Employers also will have to collect employees' payroll contributions and track records for reporting purposes. The first quarterly payments and report will be due April 30.
A Washington law (2017 Ch. 5) establishes a PFML program that, starting in 2020, will provide 12 to 18 weeks' partial wage replacement when eligible employees take time off to bond with a new child, care for their own or a family member's serious health condition, or handle a qualifying military exigency. A leave period generally cannot exceed 12 weeks, but employees needing both medical and family leave can take up to 16 weeks in a 52-week period. In addition, employees disabled by pregnancy-related complications can extend PFML another two weeks to a maximum of 18 weeks.
The PFML program covers virtually all employees working in the state, other than federal employees. Self-employed individuals and federally recognized tribes also are exempt but can opt into the program. Eligibility for benefits doesn't apply until a covered employee has worked at least 820 hours in the state for four consecutive completed calendar quarters.
Program funding will come from a 0.4% assessment on wages up to the annual Social Security wage base ($132,900 in 2019). Employers must begin collecting premium contributions with the first pay period of 2019 to ensure sufficient funds when benefits become available in 2020.
In 2019, one-third of the total premium is for family leave, while the remaining two-thirds goes toward medical leave. Contributions for medical leave (2/3 x 0.4% of covered wages) generally are split between employees and employers, but small employers with fewer than 50 employees working in the state don't have to pay the employer portion. Other employers must pay 55% of the medical leave premium but can deduct up to 100% of the family leave premium from employees' paychecks.
The state has provided a premium calculator to determine correct employer/employee contributions. For 2019, the employee contribution for both family and medical leave can be up to 63.333% of 0.4% (0.2533%) of covered wages. Employers cannot deduct more than the maximum amount per pay period. Failure to deduct in any one pay period will leave the employer liable for the employee's share by default. Employers may also opt to pay the employee contribution in full. However, it's unclear how this will affect federal taxation.
Example. Emily's covered weekly wages are $2,000. The total weekly premium for her coverage is $8 ($2,000 x 0.4%). Of that, $2.67 (one-third) is allocated as family leave, and Emily may be charged the full amount. The remaining $5.33 (two-thirds) is allocated as medical leave, and Emily may be charged up to 45% of that, or $2.40. The total that Emily's employers may collect from her weekly for the combined programs is $5.07. The employer is responsible for the remaining $2.93.
The state's reporting process is currently under development. Regulators anticipate the reports will be similar to, but separate from, unemployment insurance and other employer reporting obligations. Reports will be due at the end of the month after the close of each calendar quarter, with the first report due April 30, 2019. Most employers likely will be able to submit reports online. However, bulk filing and paper reporting options will also be available.
Required information will include the employer's Unified Business Identifier (UBI) number, business name, report preparer, and total premiums collected from employees. The report will also need to list each employee's name, Social Security number, hours worked, and wages paid in the reporting quarter.
A mandatory poster notifying employees about the program will be available before January 2020. Employers that want to advise employees about the new program now can download an optional paystub insert to distribute or post. In addition, a state-published employer toolkit includes a readiness checklist and additional sample employee communications and handbook materials.
Employers with 50 or more employees should make preliminary calculations to determine their contributions and consider whether to pay some or all of the employee portion of the premiums. Employers that are collecting employee contributions will need to coordinate with their payroll vendor or department to ensure prompt and accurate contributions. Businesses with fewer than 50 employees in the state won't need to pay the employer portion of the premium. Larger employers will need to account for the funds required to pay premiums due at the end of the quarter. All employers in the state will need to track reporting information and watch for additional reporting publications form the state.