So far, more than 1,250 local governments have opted out of the contentious Colorado program requiring employers to provide paid family and medical leave. That number stands to grow as the new March 31 deadline to opt out approaches.
That’s not too surprising to Tracy Marshall, division director of the new Family and Medical Leave Insurance Program, or FAMLI. It costs money to implement the voter-approved plan giving employees access to 12 weeks of paid time off to care for a new child or serious family health issue. To build up the fund, employers and their employees each began paying 0.45% of a worker’s salary in January.
Workers can begin requesting leave in 2024. Local governments were one of the few employers allowed to opt out.
“It’s not unexpected and it was certainly factored into our financial forecast,” Marshall said. “It’s really up to municipalities and local governments to make their own decision. We as a state do not have the authority to impose a decision upon them.”
Years in the making, but not without massive hurdles, FAMLI essentially provides income for workers who use the unpaid federal program, the Family and Medical Leave Act. Colorado’s program will pay a portion of a worker’s regular wage, to a maximum benefit of $1,100 per week. The lowest earners could receive up to 90% of their usual paycheck so they don’t have to choose between their job or taking care of themselves or their families. A worker making $3,000 a week would get 37% of their pay, or the $1,100 max. Employers won’t need to pay workers on leave but must let them return to their jobs.
The federal government is exempt from the law, but Colorado is all in, having already put $57 million in to get the fund started.
Local governments — any county, city, town, school or special district — were allowed to opt out and weren’t required to have a similar plan in place. Many have opted out because they do offer a similar plan or they have added their own. But the number bowing out is already higher than what a December actuarial report had estimated.
According to hired consultant Segal Group, the baseline was 75% of local governments would decline participation. At 1,250 currently opting out, that’s 81.5% of the 1,533 local governments used in Segal’s estimate. The deadline was extended to March 31 from Dec. 31 to give local authorities more time to vote and file the required documents.
“This poses some risk to the solvency of the program,” according to the Segal Group’s report, which The Colorado Sun received through an open records request.
But not much risk, apparently. The report went on to say that even if 100% of local governments opt out, the fund will still be solvent in 10 years, but with a pool of money 9.4% lower. The fund is expected to have a balance of $1.4 billion by the end of next year with contributions aligning with payouts through 2028. Local governments represent 9% of employees in Colorado.
As of early March, there were 4,538 active local governments, according to the Department of Local Affairs. But not all have employees so they’re not required to register with FAMLI.
However, local governments need to take an extra step after voting to opt out. They need to upload the documentation of their vote. Some may still be working on that. Denver Health and Hospital Authority, which has a little over 8,000 employees, wasn’t on record as opting out. But Heather Burke, a spokeswoman for the health system, said its board of directors had.
“We made the decision to opt out to provide the greatest flexibility for our employees,” Burke said in an email. “So, this allows employees who want to enroll and be eligible for benefits under the program to do so and pay premiums directly to the state. While those employees who do not want to participate will not be required to enroll or pay premiums under the program. Denver Health will review its participation in CO FAMLI each year.”
Employees of local governments that have opted out still can participate in the state program, but they would have to pay their own premiums.
Marshall, the FAMLI division director, said they are not concerned about the government participation numbers right now.
“Our biggest priority is building both a premiums system and benefit application system that serves both the business community and working families across Colorado, so we can implement the new voter-approved law as outlined in statute,” Marshall said.
It’s the opposite scenario that could prove devastating to FAMLI. If private employers don’t participate, the fund would run out of money in three years. Companies with similar or better paid-leave plans can get their plans approved to qualify for an exemption. And if insurers offer a lower cost, that would impact employer participation. The Segal report estimated that 25% of private employers would decline participation.
But the state won’t know that number until next year. Nearly 91,000 private employers, or 41% of the estimated 220,000 eligible, had registered for FAMLI by late February, according to state officials.
The state hasn’t received any requests from private employers to get their plans approved yet, according to the state Department of Labor and Employment. But that’s because insurers are still getting approved by the state so they can offer plans to customers, Marshall said.
However, if more employers are creating their own plans, she said, that’s a good thing.
“As long as we’re raising the floor benefits, then we’re succeeding in the paid family and medical leave space,” Marshall said. “If we have employers talking about it, if we have other towns, cities and counties coming up with their own internal plan that they feel exceeds what the state is offering, that means people are getting access to paid family and medical leave, which is the ultimate goal of the program.”
Why local governments opted in and out
Many of the state’s largest cities began opting out last year. Reasons differed, but for many, it was about the cost to the local government.
Lakewood put the annual participation cost at $750,000, split between city and workers. In Colorado Springs, the cost to the city and public utility was estimated at $1.9 million, while every city employee would pay an average of $32 a month. They voted to opt out but left it up to workers to participate on their own and pay the premiums.
Aurora opted out in September after City Council members heard that the city’s own plan exceeds FAMLI’s coverage because workers can use paid leave accruals and personal hours to cover their time off, plus other disability benefits.
In Denver, the city felt it could do it better. In a few short months, it created the Care Bank, an alternative plan that doesn’t require its employees to pay any premiums. It also provides a full salary for up to eight weeks. Other paid-time-off accruals or short-term disability could be used to cover the additional four weeks.
As for who pays for that?
“There’s technically not a cost to the Care Bank because it’s just part of an employee’s normal salary,” said Heather Britton, the city of Denver’s director of benefits, wellness and leave. “In some instances, we may need to pay overtime to another employee or we may need to hire a temporary employee to do the job while they’re out. But not every job has that.”
So far, no analysis has been done on the additional cost to the city since Care Bank just started. Britton expects that to be done soon. In January, 275 workers took paid leave using approximately 12,233 hours. That averaged out to 44.5 hours per worker.
But by forgoing the state plan, the city of Denver and its workers don’t have to pony up $10 million per year to pay the premiums.
“It would have been more of a challenge for us to enroll in FAMLI (because we’d) have hired more staff to administer this so that we could then monitor what the state was paying versus what we are paying, and then coordinating leaves,” Britton said. “I already have a leave team that administers FMLA leaves. … All the Care Bank does is provide a paid portion to FMLA.”
The city has 8,000 employees eligible for Care Bank. Another 5,000 are members of the police, firefighter or sheriff unions will need to bargain that benefit into their contract.
Not all local governments said no to FAMLI. The city of Salida, which has 184 employees, decided to stay with the state plan.
“We evaluated the benefits in FAMLI and compared them to our existing (short- and long-term disability) plan,” said Drew Nelson, city administrator. “By entering FAMLI, it is our hope that the better program will help to retain and recruit good employees for a growing and changing community.”
Costilla County, which employs about 100 people during peak seasons in southern Colorado, not only opted in to the program, it gave employees a 0.5% pay raise this year to cover their share of the premium.
“We think this program can help some of our lowest paid employees in particular,” said Ben Doon, chief administrative officer for the Costilla County Board of Commissioners. “We do have a sick leave donation program where employees can gain some additional time off in the event of an emergent situation, but many employees that have had to take FMLA or extended time due to family/medical emergencies can still go weeks without a paycheck.”