PFL Hot Topic - Early Payroll Deductions for Paid Family Leave
March 10, 2017
Is it true that the draft regulations let employers deduct contributions for Paid Family Leave (PFL) early? And how soon before 01/01/18 can they start?
Yes, if they choose to. Administration around Paid Family Leave may become a reality for businesses much sooner than the official 01/01/18 launch date. Here’s what the draft regulations state:
“380-2.4 (d) An employer is permitted, but not required, to collect the weekly employee contribution on July 1, 2017, for paid family leave coverage beginning on January 1, 2018.”
Why might employers want to start withholding for Paid Family Leave as early as July?
It reduces cash-flow impact for employers: Paid Family Leave premiums need to be paid together with DBL premiums. DBL contracts are often paid annually in advance, which means employers will pay for both benefits upfront and only recoup the PFL portion gradually through payroll deduction over the course of the year. Collecting PFL premium from payroll early alleviates some of the upfront financial burden on the employer.
What does it mean? What are the impacts?
- Employers which start collecting payroll deductions early will be able to partially pre-fund their annual Paid Family Leave premiums based on the number of months during which they collect PFL premium in advance.
- Payroll deductions prior to the 01/01/18 launch date will not affect employees’ eligibility for future Paid Family Leave benefits.
- Employers don’t have to refund payroll deductions collected from employees between 07/01/17 and 01/01/18 for those employees that leave employment during the same time period.
- Employers can’t retroactively collect payroll deductions for Paid Family Leave.
- Employers cannot collect more than the allowable maximum contribution for PFL through payroll deductions. But if they do, the employer must return the excess amount to the employee.
- If the employer fails to provide a Paid Family Leave policy but collects payroll deductions from employees, the employer must refund those payroll deductions taken from employees.
This information is based on the current draft regulations; and we will update you should this change with the release of the final regulations. Got more questions? Email us at email@example.com