Reading the new parental leave law

Last updated on: April 6, 2016 at 4:38 pm by Jane the Actuary

Reading the new parental leave law 2016-04-06T16:38:19-06:00 Jane the Actuary

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Lost in the hubub around California’s and New York’s minimum wage increases is the fact that, at the same time, New York enacted a family leave bill.

Now, there are various articles providing the basics of the provisions of this legislation, for instance, at the Huffington Post, but even on the governor’s official web page touting the new law, I can’t find reference to the actual legislation, nor the name/number of the bill itself. The best I can find is an article from February 2, 2016, reporting that the state Assembly had passed a bill (with a link pointing to bill A3870A), but that its prospects for being passed in the Senate were uncertain. Ultiamately I found an article from March 14th that family leave was a part of the budget negotiations, and, turns out, this is all in Part SS of budget legislation, so let’s look at this text, starting on page 90.

At this point, I’m just going to be a bit dorky, and take some notes to answer the questions of how generous the benefits are, how sound the funding is, and whatever else seems relevant, because I’ve gotten irritated at reading coverage that is so short on details. For context, incidentally, New York State has had a longstanding state short-term disability benefit, which pays 50% of wages, for up to 26 weeks (summarized, e.g., here); employees pay a small contribution as a percent of pay and employers are required to make up the difference for their employees, either by paying the cost for short-term disability insurance or by self-funding.

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Section 1: these are all amendments to worker’s compensation legislation, so that the entire law reads as amendments and additions to the Worker’s Comp law, section 201. New subdivision 15 defines family leave:

Care required due to a “serious health condition” of a family member (including physical or psychological care), or to bond with a new family member within the first twelve months after birth, or after placement for adoption or foster care, or any circumstance defined under FMLA because a family member has been called up for duty in the armed forces.

Employees are eligible if they’ve worked for 26 consecutive weeks at a given employer. Upon returning to work, they will be guaranteed their job or a comparable one, with the same pay and benefits, and the will be eligible to continue their health insurance during their leave. Any return to work and resumption of leave period within 3 months will be counted as the same period of leave.

Beginning 1/1/2018, the weekly benefit is defined as a maximum of 8 weeks in any 52 calendar week period, at 50% of the employee’s average wage, up to a maximum of 50% of the state’s average wage. On 1/1/2019, this increases to 10 weeks, and 55%. On 1/1/2020, 10 weeks, 60%. On 1/1/2021 and thereafter, 12 weeks, and 67% of pay.

The Superintendent of Financial Services may delay the increases for one or more years, taking into account the following factors:

cost to employees
“the current number of insurers issuing insurance policies with a family leave benefit and any expected change in the number of insurers issuing such policies after the benefit increase”
“the impact of the benefit increase on employers’ business and the overall stability of the program ot the extent that informaton is readily available”
“the impact of the benefit increase on the financial stability of the disability and family leave insurance market and carriers” and
“any additional factors that the superintendent of financial services deems relevant.”

The minimum benefit is set at $100/week, and benefits may be taken intermittently, even in day increments.

Benefits from disability and family leave programs may not be paid out concurrently, and in any case, the disability maximum of 26 weeks may not be lengthened with family leave benefits.

Employees are required to give 30 days notice where possible (e.g., childbirth, placement of a child).

There are defined processes for disputing family leave claims, and for the timing of benefit payouts. And the Chair and Superintendent of Financial Services may require any insurer to provide annual reporting in terms of claims paid, duration, number of claims rejected, etc.

Contributions: employees pay for disability, 0.5% of pay, up to a maximum of 60 cents per week. (This seems very low!) For family leave benefits, section 3B on page 100 says, “on June 1, 2017 and annually thereafter on September first, the Superintendent of Financial Services shall set the maximum employee contribution, using sound actuarial principles and the reprots provided in section two hundred eight of this article. No employer shall be required to fund any portion of the family leave benefit.”

The employer collects the contributions through payroll deduction. “In no event may the employee’s annual contribution for family leave exceed his or her percapita share of the actual annual premium charged for the same year and must be determined consistent with the principle that employees shold pay the total costs of family leave premium.” Which seems to suggest that the intention is that employers find insurance carriers and pass along the premiums as a percent of pay. But the “maximum employee contribution” in the preceding section is then not clear, unless the expectation is that any costs bove this maximum must be the result of employers trying to cheat their employees. There’s some further text that contributions collected must be held in trust, in segregated funds, for the purpose of providing benefits, both applicable to disability and family leave benefits, and description of the various vehicles for providing these benefits.

There’s then some verbiage about the definition of employees, and various other bits about notice and claims, and penalties and arbitration. For state employees, there is a special state insurance fund, with contributions determined actuarially. And then here’s juicy bit, on page 116:

On or before June 1, 2017, the Superintendent of Financial Services by regulation, in consultation with the chair of the workers’ compensation board of this state, shall determine whether the family leave benefit coverage of a group accident and health insurance policy providing disability and family leave benefits pursuant to article 9 of the worker’s compensation law, including policies issued by the state insurance fund, shall be experience rated or community rated, which may include subjecting the family leave benefit coverage of the policy to a risk adjustment mechanism. Notwithstanding any law to the contrary, the superintendent shall establish the rates for any community rated family leave beneift coverage and shall apply commonly accepted actuarial principles to establish community rated family leave benefit coverage rates that are not excessive, inadequate, or unfairly discriminatory.

What does this mean? Basically that the costs will be spread out through the entire population, so that employees who work at an employer whose employees take this benefit infrequently will pay the same as those who take the benefit frequently — whether the differences are due to age, predominent sex of the employees, or income levels (the poor have been less likely to take California’s maternity leave benefit, because 50% of a low wage doesn’t go far enough). The largely female staff of a hair salon will pay the same rate as the largely male staff of a repair shop.

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And that’s about it. Notice that there is nothing in the legislation that states what the costs will actually work out to, just that, whatever they are, employees pay them, and the state will defer increases in benefit if they turn out to be too high. But the news reports all give an actual figure, “about $1 per week per employee,” per the previously-linked Huffington Post article. Presumably there were actuarial studies that projected that this’d be the expense, on average, but I haven’t found anything.

Now, as family leave benefits go, this is actually sensibly designed, insofar as it’s paid by employees, not employers. The only costs to the employer are the “cost” of an employee being more likely to go on leave if the benefit is paid than unpaid, which, quite honestly, as far as the matter of new parents is concerned, seems reasonable to me. There is a question of whether employers will have difficulty with potential abuse, if employees with elderly parents, say, use the benefit year after year, in its one-day-at-a-time form, to work 3/4s time, which could indeed be disruptive, and, as in any such benefit, potential for fraud, with a doctor certifying the “serious illness of a family member” when it’s not the case. This also requires an entirely new infrastructure of “family leave insurance” providers, and how likely this is to come into being I don’t know, though that is the reason for the proposal of risk-adjustment mechanisms. But the big question — and the one we won’t know the answer to until implementation — is how workers will feel about the (as yet unknown) percent-of-pay being deducted on their behalf.

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