How Paid Family Medical Leave Changes Employer Benefits Planning

Paid family and medical leave is expanding fast, and the hardest part for employers isn't learning one state's rule. It's realizing how quickly the planning window closes once a workforce crosses state lines.

Kaleb Bledsoe, CRC Benefits' National Ancillary Practice Leader, joins us to unpack where PFML stands today and why it now belongs at the center of benefits planning, not the edges.

We cover how to map exposure by where employees live and work, not where a company is headquartered, why remote teams raise the stakes, and what Maryland's early Declaration of Intent window means for prefunding decisions well before 2028.

We also break down the benefits stack brokers get wrong most often: PFML pays first, not instead of short-term disability, and state caps can leave real income gaps for higher earners.

Check out more info from CRC Benefits Tools + Intel here! 

Transcript

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Michelle McCaw: 00:01
Welcome back to the Benefit Check Podcast. I'm Michelle McCaw and I'm Amanda Knight. And today we're talking about a state-paid family and medical leave, where it stands nationally right now, what's already live, what's coming, what it actually means for the benefits programs your clients already have in place.

Amanda Knight: 00:17
And this truly is not just a single state story. This is happening all across the country. And the planning window is actually shorter than most employers probably realize.

Michelle McCaw: 00:27
It really is. And here's a question that keeps coming up a lot right now. If my client has employed in multiple states, which case these bots actually apply to them?

Amanda Knight: 00:37
And honestly, the answer is a lot more complicated than it should be. Every state does it differently. The timelines are all over the place, and some of those deadlines are already here.

Michelle McCaw: 00:48
Yeah, that's exactly why we wanted to get our friend Kaleb Bledsoe in on this one. Kaleb is our national ancillary practice leader at CRC Benefits, and it's genuinely his world.

Amanda Knight: 00:59
This is the CRC Benefits Podcast from CRC Group. This podcast features news and insights from those working with our vast network of 20,000 brokers to deliver employee benefits to more than 200,000 small and medium-sized businesses. Plus, we give you the latest information on what is happening at CRC. This is the CRC Benefits Podcast. And now the hosts of the podcast, Michelle McCaw and Amanda Knight.

Michelle McCaw: 01:23
Kaleb, we're so glad you're here.

Kaleb Bledsoe: 01:25
Well, hi, Michelle and Amanda. I am super excited to be here as well. Paid Family Medical Leave is something I'm very passionate about making sure brokers and their clients are educated on it and helping them get set up for success. So excited to get into it with you all.

Michelle McCaw: 01:40
Awesome. We appreciate that so much. Kaleb, there are now more than a dozen states with active paid family medical leave programs and more are coming online. Maryland, I know, is a big one right now, and we want to get into that today because the planning window is open right now. But before we do, how should brokers be thinking about this on a national level?

Kaleb Bledsoe: 02:01
Yeah, it's a great question. I think the total count for today is there are 14 states that are currently participating in a paid family medical leave program. But kind of an interesting fact is that the laws have really remained dormant from about the kind of late 1940s until 2016. So we had three states back in the day, New Jersey, New York, and California, who had rolled out some variation of a state plan. And then in 2016, it was like somebody decided to kind of push the gas pedal down and accelerate everything because we went from three to 14 in the span of 10 years. So I would just say overall, this is no longer a niche benefit. This is something that is going to continue to roll out and become really more than just kind of an ancillary benefit into kind of a core part of how an employer handles their workforce and kind of making sure they're compliant across their state lines.

Amanda Knight: 02:53
And for a client with people that are spread across multiple states with some active programs, some without, where do you even start mapping

Amanda Knight: 03:02
 That kind of exposure, Kaleb?

Kaleb Bledsoe: 03:04
Yeah, I think the place to start is looking at workforce locations, so where employees actually live, instead of headquarters where a company is based. Paid family medical leave plans are generally administered and required to be compliant based on where an employee actually lives and works, versus a company being headquartered in Dallas, for example, or in Boston. So it's critical that employers understand both where an employee's home zip code is, but also where their work zip code may be if they're kind of commuting into work and crossing state lines to do that.

Michelle McCaw: 03:38
Yeah, for sure. And I imagine remote work really changed that footprint too for a lot of employers. Are you seeing clients with PFML obligations that they don't even know about yet?

Kaleb Bledsoe: 03:48
Yeah, that's a great point. Remote work has completely changed everything. So obviously in 2020, when COVID rolled around and employers let employees kind of work from home, and that really kind of changed the landscape of how people were working. More and more they were finding talent in states that were outside of where they might be headquartered because it just wasn't as relevant. So it's been very spread out. States will typically even have laws that even if you only have one employee in a state like Colorado, for example, that employee still needs to participate in the state's paid family medical leave program one way or the other. So that has been a big shift in the industry. That's a great question.

Amanda Knight: 04:28
So let's get a little specific on timing. I know that Delaware, Minnesota, and Maine all went live this year. Maryland is in its planning phase right now. And this

Amanda Knight: 04:42
 Is where I think we really want to spend some time because the timeline surprises people. So the benefit start date in Maryland isn't until January 2028, but obviously the work has to start well before that. So, can you sort of walk us through why it's important that employers start moving on this right now in 2026?

Kaleb Bledsoe: 05:03
For Maryland specifically, it's a great example because Maryland has rolled out something called a DOI window or declaration of intent. So even though the actual benefit is not effective until 2028, they are looking at ways to prefund their claims pool and make employers try to be on top of this issue well in advance. So that DOI window, I believe it is September 1st through November 15th. So it's about, you know, two months essentially for an employer to kind of get a chance to review what that window looks like. That window is really critical because an employer actually has to go back and file some paperwork with the state to say, hey, we intend to go private. So even though we're a year and some change in advance, the employer has to indicate they want to go private well ahead of time. That's really one key reason around pre-funding the state benefit pool. States are trying to collect tax money a year in advance so they have a big pool of money when the actual claims start coming in. For employers, it's critical to understand that timeline because there's some major tax ramifications for them for going to the state versus going private. And ideally, they're going to quote well ahead of time so they

Kaleb Bledsoe: 06:20
 Kind of get a sense directionally of if the private plans are going to be a competitive or price advantaged option for them versus going to the state.

Michelle McCaw: 06:28
And I think there's some nuances too in Maryland around like how employer size gets counted, including, like we mentioned before, employees working outside of the state. So where do those kind of details tend to catch employers off guard?

Kaleb Bledsoe: 06:42
Yeah, it's a great question. I'll say broadly, even just outside of Maryland, essentially every single state has some sort of threshold or cutoff to where an employee's payroll taxes may either be employee only to fund the benefit, or it's going to be a combination of the employee and employer. So Maryland specifically is at the 15 employee mark. So 15 or above employers and employees are actually contributing to the plan under 15. So for small, small employers, it's just the employee that's funding their half of the benefit. And the employer doesn't actually owe payroll taxes on that. So it's a it's a little bit of flexibility to kind of give really small employers, I guess, a little bit of an advantage in terms of pricing. So ultimately, private plans will generally follow that threshold in that it's a little bit easier of a sell to go private at whatever that threshold cutoff is, because pricing's that there's kind of more room in the pricing for carriers to get competitive over what the state is offering.

Amanda Knight: 07:43
And I know one of the other things that comes up a lot in client conversations is sort of this assumption that PFML replaces short-term disability. It doesn't, but the relationship between them is genuinely kind of complicated. So can you walk us through how those actually interact and work together?

Kaleb Bledsoe: 08:05
Yeah, it's a great question because I've seen in a lot of different state rollouts, kind of the false narrative or assumption that if a client gets a private PFML plan or goes to the state, it's going to actually serve as a replacement for their short-term disability plan, which is not the case. The benefits really cover kind of two separate, I would say almost like verticals in terms of why an employee would take leave. So I'll be really specific with some examples because I think it's very important that a client doesn't cancel their STD. So short-term disability is typically going to be tied to either an illness or an injury. So it's an actual medical claim that your doctor will approve and work with a carrier to allow an employee to take leave. Paid family medical leave is much more broad than that. So paid family medical leave can cover things like taking leave for childcare or taking leave to take care of a sick or ill parent or grandparent, and even taking leave for things like military leave and things like that. So there's a lot of nuance in how these benefits actually handle claims, and they don't always cover or interact the same way. Kind of another important note is that generally, on average, a paid family medical leave is only going to cover employees up to about $80,000 of annual salary, and that's roughly where the cap kind of hits on average per state. STD plans are much more flexible in that you can offer higher amounts of coverage to kind of fully cover your higher paid employees, executives, management class, things like that, which is critical because you don't want to create a situation where an employee will go out on leave expecting for their benefits to kind of fully cover their income and then be capped much sooner than an SDD plan would typically replace.

Michelle McCaw: 09:56
Yeah, definitely, definitely. And so in those cases, does PFML it pays first? Is that right? And then what does that mean for how a broker should be looking at that disability plan? Does that change that?

Kaleb Bledsoe: 10:10
Yeah, so PFML is generally considered what we call the first payer, which essentially means if you do have a claim that does overlap and kind of dip into both buckets, so a claim that would be eligible for STD and eligible for PFML, PFML is going to pay first. So let's just say for simplicity, let's say it pays a thousand dollar weekly benefit out of PFML, but you might want to, you're in a situation where an employee should really be covered up to $1,200 or $1,300 per week for their income. At that point, short-term disability would kind of kick in and cover that additional benefit, whatever is left on that income, assuming that they have an STD plan in place that kind of correctly covers their income. That kind of also is important to note. It's important to note because short-term disability from a pricing standpoint, just for brokers and their clients to understand, is going to be offset by whatever the PFML benefit is in terms of volume, which is directly going to relate to pricing. So I would really encourage a client before they cancel their SDD plan, let the carrier review the SDD and reset the pricing because it might end up being much more affordable because of that offset than it was before paid family medical leave rolled out.

Michelle McCaw: 11:22
Yeah, excellent point. So now what about the clients that have say, an already very generous parental leave policy? So should they revisit that once that state program kicks in?

Kaleb Bledsoe: 11:35
Absolutely. I, you know, for employers that have set up what we call either a corporate leave plan or a kind of internal parental leave plan that they're administering, they should review kind of what their guidelines are for that and either match it up with what the PFML plan is or kind of redesign it so it works hand in hand with what PFML is. So ultimately they're whatever they're intending is working together correctly versus just kind of creating a confusing situation for employees when they actually need to file a claim.

Amanda Knight: 12:07
And then when it comes to long-term disability, is there a gap risk there that we also need to check for?

Kaleb Bledsoe: 12:14
There can be. Typically what we see with paid family medical leave plans rollout is that they're a 12-week benefit. And these days that matches up really well with what industry standard is, with what we call dovetailing, which is when an STD policy effectively ends and then an LTD plan picks up right away, so there's no gap in coverage. So many employers, or I should say most at this point have a an LTD plan that's going to work really well with PFML, but there are plenty that still have what I call a 180-day elimination period. So that means that LTD doesn't actually kick in until 180 days have passed. And there could be a significant gap of three months if they don't change that policy to mirror what PFML is rolling out at. So that's an important distinction and is something certainly that you should be talking to your brokers or your carrier about to revisit.

Amanda Knight: 13:07
So let's transition a little bit and talk private plans because in states that allow it, this is a real decision point, right? And one where brokers can add a lot of value. So, Kaleb, what's the actual evaluation a broker should be running when a client asks whether it's time to go private?

Kaleb Bledsoe: 13:26
Today, today's broker and consultant should really be thinking of themselves as a true holistic absence or leave consultant. Disability is not the only relevant thing to talk to when you walk into a client's office anymore. They need to be thinking about federal leave, paid family medical leave, and disability as kind of one true absence solution. So I think when you the first kind of questions to ask a client, whether it's prospective or somebody that you've been working with for a long time, get an understanding of their workforce. What states do they have employees in? Have they hired remote workers that are in a new area for where the employer maybe

Kaleb Bledsoe: 14:02
 Not caught up on the compliance laws, and sit down and have that kind of in-depth discussion and analysis, especially if there's been things like acquisitions or a merger into a new area. The second component of this is that paid family medical leave plans are individually underwritten when you go to go to private with a carrier. So they're quoted in a similar way to short-term disability, where depending on the group's demographics, pricing can vary. So it may be very favorable for a client, or there could be situations where it makes more sense to go to the state. So I think the first place is look at the census, understand where employees are based, and then ultimately get a quote going so that you can take a look at the pricing.

Michelle McCaw: 14:44
So what does it look like when a broker gets this right? Like how does that change the broker-client relationship?

Kaleb Bledsoe: 14:51
Yeah, I think ultimately this is a great place to establish trust. Employers have so much to manage these days, and keeping up with compliance laws on something as specific as paid family medical leave is too much, especially for smaller employers to be able to manage effectively. When they may be hiring employees in that remote situation where they're focused on finding talent, but don't understand what laws may come into effect. I think for a broker, this is a great opportunity to truly be a consultant, keep your clients essentially safe and away from things like penalties and fees, and establish a better situation for employees in terms of how they manage their lives and can be flexible around their own claims.

Amanda Knight: 15:32
What about the employee communication side? Because I feel like sometimes that's where the ball can get dropped. Like, what does it actually cost when that breaks down?

Kaleb Bledsoe: 15:43
It's a great question. I think the first place to start is whatever state you're gonna be in, there's a whole lot of guidelines around how do you actually communicate this benefit as it's coming out. I'll use Colorado as an example. They required employers to post tons of notices in like employee break rooms, kind of on-site in offices or cubicles and hold things like group meetings. Where that's become really challenging is as we kind of talked about, the employer workforce has shifted to being so much more remote or kind of multi-site than it used to be. So break room communications are pretty outdated when people are using things like AI to like understand their world. So I think the first place has to start, a broker has to really be strategic and work with their HR teams and employers to create an effective communication strategy that has to be more involved than just break room notices. Because on the other side of it, there is a real cost when things are not followed from a compliance standpoint effectively. So for the employee, it could be a real dollar loss in terms of not filing their claims correctly, not understanding when they can take leave, impacting the short-term disability experience when really it should be a PFML claim. So that could hurt the employer's insurance renewals and pricing from that standpoint. And then ultimately, there are things like penalties and fees. I'll use the state of New York, for example. There's kind of infamously some fees associated with needing to backdate and retro effective date plans like DBL insurance. So staying compliant both has a financial impact as well as an employee well-being impact.

Michelle McCaw: 17:19
Definitely. And so, Kaleb, before we move on to the next segment of this, is there anything else that you think brokers should know about PFML, either in their state or on a national level?

Kaleb Bledsoe: 17:33
I want to hit this point really firmly because we touched on it briefly earlier, but I think if there's one big takeaway for new states that are rolling out, it's that taxability around prefunding a plan and when it makes sense to go private versus to the state. What I mean by that is prefunding a plan essentially requires an employer to pay a full year of payroll taxes into the state that effectively just kind of gets brought into the pool, and then employers and employees don't see that tax money again, and they're continuing to fund the plan as years go on. In most states, if they decide to go private, they actually get to either get a refund on that tax so the state will pay it back in a big check, or they'll get to hold on to it themselves and then ultimately distribute that money however they want to internally without needing to pay it to the state. 

Kaleb Bledsoe: 18:25
That can have some major, major payroll implications and kind of tax implications because a full year of a payroll tax, it might be one or even one and a half percent of your total payroll to pre-fund a plan, those are significant dollars, especially if you have a hundred or more employees. So I really want to hit on that. Please make sure you understand what market you're in, what state you're in, and handle that prefunding correctly. That's an area where CRC benefits can help you manage the finances, understand the situation you're in, and ultimately, hopefully save quite a bit of money.

Michelle McCaw: 18:57
Definitely. Excellent point. Kaleb, and you and your team are ready to assist our brokers with those questions and more. So that's awesome.

Kaleb Bledsoe: 19:05
100%. We are PFML nerds over here.

Amanda Knight: 19:09
I want the people handling complicated things like this to be nerds. Let's be clear. That is a positive thing.

Michelle McCaw: 19:17
That definitely is a positive. Okay, Kaleb. So before we let you go, it's time for our audience to get to know you a little bit than just a dental vision guy.

Amanda Knight: 19:29
We've got three questions for you. Sounds like a plan. I know. I get excited. So we've got three questions for you. Totally unscripted to say the first thing that comes to mind. Ready?

Kaleb Bledsoe: 19:40
Shoot.

Amanda Knight: 19:40
Okay.

Michelle McCaw: 19:41
No pressure, but what's your last meal on earth? What is it? And who's at the table with you?

Kaleb Bledsoe: 19:48
That's a great question. I love tacos and specifically really spicy tacos, the kind that just make you almost regret eating them. So whoever, I guess, is sitting at the table with me is not gonna be happy. I invited them, but definitely my wife will be there, and then probably my dad and mom, since they don't love spicy stuff, but I'll make them sit through it with me.

Michelle McCaw: 20:13
I love that. I'll do it for their baby boy, I'm sure.

Amanda Knight: 20:18
Question number two, Kaleb. What did you want to be when you grew up? And how far off did you land? And if you say that when you were six year old, six years old, you wanted to be an ancillary superstar, I am calling you out.

Kaleb Bledsoe: 20:35
Yeah, that's fair. I don't know if anybody grows up wanted to be an insurance sales guy, but so you all you know, back in the day, I would tell you, yeah, right, to be a basketball NBA legend. And I can tell you that may have been when I was 10, and by the time I hit 15, everyone's like, that's not happening. Like the throw in the towel. So it was a short-lived dream.

Amanda Knight: 21:01
Yeah. You've got the hype for it, unfortunately.

Kaleb Bledsoe: 21:04
I've got all the hype and none of the coordination. That's perfect. Yeah, right.

Michelle McCaw: 21:10
I love it. Okay, last one. If your Saturday had a theme song, what would it be?

Kaleb Bledsoe: 21:18
Oh boy. Right off the rip, I'm gonna have to say, I don't know. My mind just went completely blank. That's so lame. I'm gonna have to think about that for a second that you're gonna have to ask me again. What would be your Saturday theme song?

Michelle McCaw: 21:36
Hey, this isn't about me.

Amanda Knight: 21:40
Right. I don't have one either. Amanda, what's your Saturday theme song? Hold on. It depends on the Saturday. I think a Saturday where I can do whatever I want would be like I can't stop the feeling. Oh, they're gonna go with Justin Timberlake.

Michelle McCaw: 21:54
Yeah.

Amanda Knight: 21:56
But if it's like we are getting things done, all the things done, like the no all the chores no one wants to do ever, I think we're going with Don't Stop Me Now. These are like weird.

Kaleb Bledsoe: 22:08
These are also good. I'm gonna say with How Much My Life So by Sabrina Carpenter, which I don't know if that's my theme song, but it's become our household theme song. I wake up to that more than I want to.

Amanda Knight: 22:19
Then it is your theme song, but that's true. You no longer gonna say.

Michelle McCaw: 22:28
Is that what it is?

Kaleb Bledsoe: 22:30
It's felt like that for like the last six months, so I think so.

Amanda Knight: 22:33
I like it. Hey, I think that's great. That's I feel like the theme song we all need for a Saturday would be like take it easy. You know?

Michelle McCaw: 22:43
So cool. Kaleb, that was so good. Thank you for breaking all that down. It's so complex. I feel like we could have kept going for another hour.

Amanda Knight: 22:54
And if you're listening and this is already coming up in your client conversations, or you know it's coming and you just haven't had time to dig in yet, we'll link the full article in the show notes.

Michelle McCaw: 23:05
We will. And if you want Kaleb and his team involved in your next conversation, whether it's figuring out what applies, looking at private plans, your options, sorting out how it all fits together, reach out to CRC Benefits. We'd love to help you out.

Amanda Knight: 23:19
Thanks for listening to the Benefit Check Podcast. We'll see you next time.