Voluntary paid leave: A different way

This article, written by attorney Brian Bouchard, was originally published by both seacoastonline.com and the NHBR and can be found here.

COVID-19 foisted paid leave into the public conversation. Federal programs like the Families First Coronavirus Response Act (FFCRA) mandated periods of paid leave—short and long—for qualifying employees and offset the expense on businesses with a payroll tax credit. The FFCRA has largely been viewed as a success: both in terms of curbing the pandemic and keeping the heads of many employees who needed medical leave above water.

Since then, many states have debated enacting permanent paid leave programs. These programs have historically been mandatory; meaning that qualifying employers were obligated to offer paid leave to qualifying employees. New Hampshire—in an attempt to balance the benefits of paid leave programs like the FFCRA with our State’s more laissez-faire policy instincts—has adopted a first-in-the-nation voluntary paid leave program for companies and individuals alike. Here are the basic mechanics.

The Program: The program, the Granite State Paid Family Leave Plan, uses a combination of insurance, known as family medical leave insurance (FMLI) and tax credits for participating businesses. Using state employees as a risk pool (of which there are approximately 10,000), MetLife will provide FMLI as the State’s provider. Employers and/or individuals will then pay insurance premiums against the event family or medical leave is needed while an individual is insured.

At the core of the FMLI program is a business tax credit designed to incentivize business participation and advance the State’s policy of providing a market of “advantageously priced wage replacement benefits.” The wage replacement and tax mechanism are capped at the amount of the “Social Security Taxable Wage Maximum” as it may be occasionally amended.

Participating businesses will receive a Business Enterprise Tax (“BET”) credit of up to 50% of the premiums they pay under the program. Notably, while employers may choose to purchase NH FMLI from insurance carriers other than MetLife, they will not qualify for the credit through other providers. To qualify for the credit, businesses must submit a BPT Credit (form DP-160) to the NH Department of Revenue Administration to claim the tax credit.

Type of Leave: FMLI covers any leave that would result from childbirth (within the past 12 months), placement of a child with the employee for adoption or fostering (within the past 12 months), a serious health condition of a family member, or any other qualifying exigency arising from foreign deployment with the Armed Forces, or to care for a service member with a serious injury or illness as permitted under the federal family and medical leave act.

Program Benefits: The FMLI program provides a minimum of six weeks of wage replacement at 60% of an employee’s average weekly wage. Wage replacement is capped, however, at the Social Security wage cap, which for 2022, is $147,000.

Duration: The duration of paid leave depends on the plan sponsor. Individuals and state employees receive a statutory maximum of six weeks paid leave. Employers opting into a group plan, however, choose between a six-week paid leave plan or a 12-week paid leave plan. In either situation, leave may be taken continuously or intermittently with a minimum of 4-hour increments. Paid leave under the FMLI program must also run concurrently with other leaves. For example, an employee using six weeks of paid leave will concurrently exhaust half of the leave provided under the FMLA, which provides for 12 weeks of leave for qualifying employees.

Eligibility: All Granite state businesses, regardless of size, are eligible to participate in the new voluntary paid leave program. This is a departure from the FMLA, which applies to companies with only 50 or more employees.

Individuals can also participate regardless of whether their company participates in the New Hampshire voluntary program, so long as their company does not offer an equivalent benefit. One caveat to the individual option (or companies who participate with fewer than 50 employees) is that the employee’s leave—while paid—will not have job protection attached. This means that an employee returning from leave will not be guaranteed reinstatement into their former position or an equivalent position. Job-protected leave applies only if the business has 50 or more employees and is considered on the same terms as the FMLA. Additionally, continued healthcare coverage is only guaranteed when a company with 50 or more employees opts into the program.

Payment of Premiums and Cost: To participate in the program, employers and individuals will contract with MetLife (or their selected provider). Companies with 50 or more employees must allow payment for the insurance premiums to be deducted from payroll, even if they do not participate in the program. Everyone else (including smaller companies and individuals) has the option of allowing payroll deduction or paying premiums directly to MetLife. Premiums for individual coverage will not exceed $5 per subscriber per week. Individual programs will have a mandatory 7-month waiting period and a 60-day annual open enrollment period.

Interestingly, unlike other paid leave programs, employers are not required to pay 100% of the premiums. Employers and employees may split the cost at any ratio. This is an attractive feature for smaller companies that wish to provide paid leave but cannot afford the total premium cost. For example, an employer and employee could each pay 50% of the premiums, or they could split the cost at 70%, 30%. The cost of the employee’s portion can be deducted directly from their payroll.