Under Washington’s upcoming Paid Family and Medical Leave (PFML) insurance program, eligible employees will be entitled to paid family and medical leave, as detailed in our previous advisory (available here). Employers who want to opt out of the state program and not remit premium payments to the state beginning in January 2019 may apply for a voluntary plan now (application available here). This advisory provides details regarding the voluntary plan requirements and application process.
To help prepare employers for the implementation, Davis Wright Tremaine is publishing a series of advisories on PFML, this is the second in the series; the series will continue as Washington’s Employment Security Department (“ESD”) completes its rulemaking process.
Requirements of a Voluntary Plan
In order to opt out of participation in the state PFML program, employers must apply for and receive state approval to implement a voluntary plan. Employers may choose to opt out of the PFML program for medical leave, family leave, or both.
ESD has released a Voluntary Plan Guide (available here) that provides additional guidance regarding plan requirements. Here are some of the key components that must be included in a voluntary plan:
- Duration of Leave: The voluntary plan must meet or exceed the duration of leave provided under the state plan. Medical leave must be allowed for up to 12 weeks plus an additional 2 weeks for pregnancy complications. Family leave (including military exigency) must be allowed for up to 12 weeks. If the plan offers both medical and family leave, employees must be allowed to take up to 16 weeks plus an additional 2 weeks for pregnancy complications.
- Covered Reasons: The voluntary plan must cover absences for the same reasons as provided under the state plan. For example, this means that an employee must be allowed to take medical leave for his or her own “serious health condition,” as that term is defined by law. Employers with existing Short Term Disability (STD) plans may have to revise the definition of a covered disability in the plan if intending to use an existing STD plan to opt out of PFML.
- Waiting Period: The waiting period for all leaves (except birth or placement of a child) is 7 days.
- Benefit Amount: The employer must provide the employee with at least the same benefits the employee would receive under the state program, although the employer can provide greater benefits.
- Eligibility Requirements: The voluntary plan must contain the following eligibility requirements: the employee must have worked at least 820 hours in Washington (for any employer) in four of the past five quarters AND either (1) worked at least 340 hours for the current employer or (2) have been covered by a voluntary plan through their previous employer. The employer cannot waive these eligibility requirements in the voluntary plan, as they are required by law. However, an employer may have a separate plan that covers employees who have not met the eligibility requirements (for example, new hires).
- Reporting Requirements: Employers with voluntary plans must report all information required under the state plan, as well as weekly benefit and leave duration information for any employee who takes leave under the plan, as well any premiums withheld from employee wages.
- Third Party Administration: Employers may contract with a third-party to manage the voluntary plan, but the employer remains liable for all plan responsibilities required by the law.
- Job Protection (Employers with 50 or more employees): Employers who opt for a voluntary plan have more stringent job protection requirements than those employers who opt for the state program. Employees have job protection under a voluntary plan if they have worked for the employer for nine months and at least 965 hours for that employer during the twelve (12) months preceding the date leave will begin. Employers on the state plan must provide job protection for employees who have worked 1,250 hours for them in the last twelve (12) months (mirroring the requirements under the FMLA).
Voluntary Plan Application Process
ESD is currently accepting applications for voluntary plans (available here). The application will be submitted through an online tool which requires employers to answer a series of questions and then upload a copy of the voluntary plan document(s). Employers must pay an application fee of $250. Voluntary plans must be reapproved each year for the first three years. After three years, re-approval is required if the employer makes changes to the voluntary plan.
At this point it is unclear how long the application approval process will take. Employers should submit an application as soon as possible if they wish to opt-out of PFML before premium remittals begin January 1, 2019. We recommend applications be completed by early November to allow time for ESD to process the request and approve a voluntary plan before the end of the year. ESD anticipates that it will take approximately thirty (30) days for a voluntary plan application to be approved or denied.
An employer may apply for a voluntary plan at any point in time, including in 2019 and beyond. However, if a voluntary plan is not approved by ESD by December 31, 2018, an employer must start remitting premiums on January 1, 2019. If an employer’s voluntary plan is approved after January 1, 2019, the voluntary plan will go in effect on the first day of the next calendar quarter.
Deciding Whether to Apply for a Voluntary Plan Employers considering whether to apply for a voluntary plan should keep the following issues in mind:
- If an employer already provides paid leave in the amount equal to or exceeding what the state requires (such as a short-term disability policy), it may apply for a voluntary plan using its existing paid leave program.
- Employers using voluntary plans do not enroll new employees on the voluntary plan until they have worked for 340 hours with that employer unless the employee previously worked for an employer who had a voluntary plan (and then will be enrolled at time of hire).
- If an employer’s voluntary plan is approved prior to December 31, 2018, it does not need to start remitting premiums on January 1, 2019.
- A voluntary plan must meet or exceed state plan benefits in all aspects, including the requirement to cover all employees. Voluntary plans cannot include restrictions not allowed under the state plan (i.e., no restrictions based on age, pre-existing conditions, gender).
- An employer may have an approved voluntary plan for either family leave, medical leave, or both.
- Employers using voluntary plans must still report to the State on a quarterly basis (but will have different reporting requirements than employers on the state plan).
- An employer is not required to implement a voluntary plan to provide additional benefits to employees that exceed the state plan. An employer can offer to pay the employee’s portion of state plan premiums, for example, if they felt the need to do so for competitive reasons.
What is Coming Next
ESD has divided its rulemaking into six phases which will continue through 2019. Phase One rules (regarding collective bargaining agreements, premium liability, and voluntary plans) are final and available here.
Phase Two proposed rules are available here, and include the following topics: (1) employer responsibilities; (2) penalties; and (3) small business assistance. Phase Two hearings are scheduled to occur in late October 2018 and the rules are expected to be final in early November 2018.
Phase Three draft rules were released on September 12, 2018 and are available here. Phase Three rules cover benefit applications and benefit eligibility and are expected to be final in March 2019. Our next advisory will provide additional details regarding the Phase Two and Phase Three rules.
Phase Four, expected to begin in mid-2019, will address continuation of benefits and fraud. Phases Five and Six, expected to begin in 2019, will address job protection, benefit overpayments, and appeals.
What Employers Should Do Now
All employers in Washington should familiarize themselves with the PFML program requirements and options in advance of the upcoming effective dates.
Employers who are considering implementing a voluntary plan should carefully review any existing leave benefits and determine whether changes must be made to be in compliance with voluntary plan requirements or create a leave program that complies with the state program. Employers may submit an application for a voluntary plan now and should be prepared to submit a voluntary plan application in fall 2018 to avoid premium remittals in January 2019.
Employers who choose to enroll in the state program must ensure that processes are in place to begin remitting premiums to ESD in January 2019. Unless an employer chooses to pay the full premiums with no employee contribution, payroll should begin deducting premiums from employee paychecks in January 2019. Employers should communicate to employees about the deductions before the deductions begin in January 2019.