Income Protection Benefits: Trends in Paid Family and Medical Leave

Income Protection Benefits: Trends in Paid Family and Medical Leave

An increasing number of states are creating their own paid family and medical leave programs, which could mean more flexibility and customization for employers.
Lanell Allen, Assistant General Counsel, Group Benefits, The Hartford
Lanell Allen, Assistant General Counsel, Group Benefits, The Hartford
Megan Holstein
Megan Holstein, Head of Absence Management for Group Benefits, The Hartford
Thirty years ago, the creation of the federal Family and Medical Leave Act (FMLA) guaranteed that most working Americans could take time off to care for a sick family member, bond with a new child, tend to their own medical issues or deal with matters related to family military leave.
Because such a large influx of women entered the U.S. workforce in the two decades before the landmark federal law, the FMLA helped provide them with important job-protected leave, particularly as it related to family. FMLA gave workers much-needed time off for important milestones, but it was unpaid. It was seen by many as a first step toward what might become a national paid family and medical leave program (PFML).
Three decades later, that still hasn’t happened. Instead, an increasing number of states are stepping forward to fill that gap. As the needs of today’s workforce evolve and competition remains keen to attract and retain top talent, state PFML programs are evolving as well.

An Optional Approach Is Emerging

In 2004, California became the first state to provide a paid family leave program in addition to its existing disability insurance program. Like California, the early paid leave programs in other states required coverage, either directly through the state program or by employers, where permitted. The program benefits became available directly to employees.
“Those programs are funded, in whole or in part, by employee payroll deductions and provide some form of paid leave – either disability leave, family leave or a combination of both,” says Lanell Allen, assistant general counsel for Group Benefits at The Hartford. “The eligibility reasons, cash benefits and amount of leave vary from state to state.”
Allen explains that an emerging trend gives employers access to a PFML benefit they can voluntarily purchase or opt into. It’s a model that could help bring equity to leave benefits. Most recently:
  • New Hampshire created a paid family leave (PFL) program and Vermont created a PFML program for their respective state government workers. Both states are providing the benefits through insurance company partners. Private employers in those states can voluntarily participate in the respective programs.
  • South Dakota introduced legislation to follow New Hampshire and Vermont.
  • Virginia and Arkansas now recognize PFL as a commercial insurance product. Both states recognize that PFL can be offered either as a standalone benefit or with a group disability income benefit, providing a medical component for employees.
  • Nationally, the National Council of Insurance Legislators (NCOIL) adopted a model law that states could use to recognize paid family leave as a commercial insurance product.

Recognizing and Solving for the PFML Gaps

There is another leave benefit that’s been around far longer than FMLA. As early as 1942, many employers have purchased temporary income replacement benefits for eligible employees to get paid time off for non-work-related injuries or illnesses. These benefits, also known as short-term disability, have been a staple in employer benefit packages around the country. Many employers have partnered with private disability insurers to provide these benefits for their workers.
“This well-established benefit is largely available through the private insurance market and has often been provided at no cost to the employee. It continues to be important, because it can cover critical financial gaps of some PFML programs,” says Megan Holstein, head of Absence Management for Group Benefits at The Hartford.
PFML programs vary from state to state. They can provide eligible employees with anywhere from six to 26 weeks of leave per year, depending on the state. This includes time off for an employee to bond with a new child, care for ill or injured family members or for their own health condition. That means an employee may not have the whole amount available for their own illness if they used up some of that time earlier in the year for other qualified reasons.
Even if an employer offers long-term income protection, also known as long-term disability insurance, there’s potentially a lengthy gap in coverage from the onset of an illness or injury to when that benefit is available. Long-term income protection insurance usually doesn’t kick in until a worker has been out for 26 weeks. So, if PFML runs out at 12 weeks and the long-term disability benefits start at 26 weeks, an employee could go 14 weeks without wages. Fortunately, short-term income protection plans commonly provide about six months of paid benefits to bridge that gap.
“Even higher wage earners can face challenges,” Holstein said. “Most short-term income protection plans pay a higher portion of an employee’s pay than what is available for PMFL benefits. PFML plans often cap cash benefits well below the wage level of higher earners.”

Revisiting and Revising FMLA With Today’s Lens

The FMLA continues to provide important protections for leaves of absence, such as job restoration and health insurance continuation. However, the more recent states mandating PFML coverage have used the FMLA base, but with modernized touches.
“While there have been some changes to the federal act since its inception, so much has changed around the idea of this type of leave,” Allen says. “We see more modern views reflected in many of the recent PFML laws.”
For example, many PFML states have expanded the definition of a family member, embracing more inclusive views. Most states have decreased the number of employees that an employer must have for the program to apply. And many include expansive leave reasons such as safe leave, allowing workers to address their needs or those of a loved one related to domestic violence.
Employee benefits and the laws that shape them will continue to evolve. What hasn’t changed, but will always help to guide that evolution, is the need to care for ourselves and others.
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