Recently we’ve seen a lot of interest in California paid family leave and the overall state disability insurance program, which is why we’ve put together this episode to answer frequent questions and simply talk through a state program that can sometimes be confusing to navigate.
Listen in as Bill Mcshane, national sales advisor for the west coast, Kristin Hostetter, product lead for our CA private plan offering, and Alexa Greenberg, general counsel, answer questions on private plans and the basics of the program as well as give their thoughts on aspects employers should be especially aware of.
Resources mentioned: Lincoln's CA SDI FAQ
AM-LAACA-AUD001 02/24 Z01 LCN-6420849-022224
©2024 Lincoln National Corporation. All rights reserved.
Recently we’ve seen a lot of interest in California paid family leave and the overall state disability insurance program, which is why we’ve put together this episode to answer frequent questions and simply talk through a state program that can sometimes be confusing to navigate.
Listen in as Bill Mcshane, national sales advisor for the west coast, Kristin Hostetter, product lead for our CA private plan offering, and Alexa Greenberg, general counsel, answer questions on private plans and the basics of the program as well as give their thoughts on aspects employers should be especially aware of.
Resources mentioned: Lincoln's CA SDI FAQ
AM-LAACA-AUD001 02/24 Z01 LCN-6420849-022224
©2024 Lincoln National Corporation. All rights reserved.
Hi everyone. This is Karen Batson marketing manager at Lincoln Financial Group. Recently we've seen increased interest in our resources and information around California paid leave. So what better way to summarize key information than hosting a podcast with the people who I think know it best. In this episode, I'm joined by Bill McShane, national sales advisor for the West coast, Kristin Hostetter product lead for our California private plan offering and Alexa Greenberg general counsel. We answer questions we've seen as well as some typical questions employees may be searching for. So take a listen and I hope you enjoy the conversation. Hi everyone. Thank you so much for joining us today on the podcast. So, you know, when I invited you guys to the episode, I mentioned kind of all of the engagement we've had around California paid leave questions that we've received from our webinars. So I have to ask, were you surprised when I approached you and said, Hey, can we, can we just talk about California for a little while?
Kristin Hostetter:No, I don't think we were surprised. I think paid state leaves are so prevalent right now and we spend so much time talking about some of the newer programs that it makes sense that we're starting to receive questions on, on some of the longer standing programs like California. So no surprises here.
Bill McShane:Yeah. I would echo that and actually say it's quite exciting being based in California and having significant experience with these programs that other States are looking to the experiences we've had for insights and lessons learned and watch-outs as these new programs are moving forward.
Alexa Greenberg:I would absolutely echo that as well, even though the program is, uh, has been around for quite some time, there have been constant updates to the laws and changes, and most recently, even related to the pandemic, there is even more to pay attention to so new guidance, new laws, even just the implications of the shifting workforce due to the pandemic have prompted additional questions and interests.
Karen Batson:That kind of positions my next question really well, like so many people talk about California being so kind of confusing and, and have various complexities. Why do you think that is?
Alexa Greenberg:It can be a confusing topic simply due to the nature of how many different laws and requirements can be implicated by a single leave request. So there are the unpaid leave laws. Of course, the federal FMLA that impacts certain California employers, California family rights act, or CFRA, which provides unpaid job protected leave, California pregnancy disability leave. Then we have the California SDI, the paid component, which is the program that we're talking about today, but there's also the municipal programs that can come into play. So for example, the San Francisco paid parental leave ordinance. There could also be employer provided company leaves, which are not mandated by law. So there is quite a bit of complexity in that coordination in California.
Bill McShane:Yeah, I'd say as evidenced by what Alexa just noted. It is a little bit of an alphabet soup, uh, with acronyms and abbreviations. It can be a lot for employees and employers to digest all of those, you know, SDI PFL voluntary plan, VP CFRA, PDL SF PPLO it's. I mean, it's a mouthful, even for those of us sitting here working with these programs every day.
Karen Batson:So many acronyms you just brought out there!
Kristin Hostetter:And they all are unique. The eligibility requirements and the entitlement it's different for all of them.
Karen Batson:I think Kristin, you said it was an interesting thing the other day where just a maternity leave, that can be the most logical leave is covered by so many things in California that adds that confusion.
Kristin Hostetter:Yeah. Some of those programs start and then they have to end before another one can kick in. So it gets confusing.
Karen Batson:Now we'll spend up, sorry bill, go ahead.
Bill McShane:I was just going to add as Alexa said, some of them have job protection. Some of them don't for the paid leave. Some of them are taxable. Some of them are not. And so I think there's a lot of layers to this confusion and complexity that you bring up.
Karen Batson:Now, you all bring different distinct roles, but work within California. What kind of questions do you receive or what are some top questions that you receive that some of our listeners would be interested in those answers?
Bill McShane:Sure. I can start, uh, here. Um, so, so in my role, I work with the sales and account management team. Most often on clients or prospects that are pursuing a private plan solution in California. I know we'll spend some more time talking about that throughout the course of our discussion today, but a lot of what comes across my desk are questions about the pros and cons of participating in California state program versus, uh, establishing a private plan and really what's involved in pursuing a private plan for those that may want to choose that path.
Kristin Hostetter:I would add too, from a product perspective, we get similar questions, but a lot of times it's kind of focused on how can you make these things work together? How can you make this complexity simple and help our employer partners to make sense of the different leaves out there.
Alexa Greenberg:And also sticking with that complexity and coordination theme. I typically do see quite a few questions about integration of benefits, such as with PTO or supplementing the SDI benefits. So on the most basic level, an employer may only require an employee to use up to two weeks of vacation or pay time off prior to receiving a benefit. Um, so not all of their PTO, and then yes, the SDI benefit can be supplemented. So an employee could receive up to a hundred percent of their normal weekly salary during the DI or PFL benefit period. But according to the California unemployment insurance code employees cannot receive more than 100% of their normal weekly salary during the same period. So, uh, it's an interesting topic also because among the PFML States, there is not much consistency in how coordination works. So every state has its own peculiar requirements.
Karen Batson:Now, curiosity question from just listening to these answers, do we ever get asked like best practices on how to communicate these things to employees? I know often employers are probably asking you that these technical questions, but does that ever come up where, well, how do I, how do I educate my employees on, on these leaves and what's covering them'cause I'm having a hard enough time understanding what you're telling me here. I probably said that very simply, but just curious if that comes up.
Kristin Hostetter:Absolutely. I think that's one of the, I do think that's one of the questions we probably get pretty frequently is how do we educate employees and let them know, you know, exactly what they need to do and what information they need to send, where to, to make sure that they have the right protections in place for their varied leave reasons.
Bill McShane:Yeah, I would say our, our customers in particular, for those that have private plans with us, really look to Lincoln to try and help simplify the communications, you know, to the extent possible from an employee perspective, they're either focused on how long can I stay out and get paid or how long can I stay out? And you know, us, uh, as an administrator, helping their employees to understand those simple questions, you know, with, with the overarching umbrella of all of the leave types paid and unpaid that we hit on earlier, really, you know, through our communications, trying to keep the messages simple.
Karen Batson:Well, one of the things I did to kind of prep for this episode was to, you know, out of the basics, what are like top questions being Googled right now. So I thought I'd ask you a few of these. So let's start with the most high level. What is state disability, insurance or SDI, which we've now said a couple of times and is the paid family leave a component of that program?
Alexa Greenberg:Sure. Uh, so the California STI program, which is overseen by the employment development department, the EDD provides partial wage replacement to California employees who cannot work because of a non work-related illness, injury or pregnancy. The statutory program has been around for some time established in 1946, some history there, uh, PFL is a component of SDI workers covered by the SDI program are also covered under PFL, but the PFL legislation wasn't passed until 2002, the benefits became available in 2004. So it was the very first PFL program in the United States, which is exciting as bill mentioned earlier.
Karen Batson:So kind of going through that explanation, how California SDI work and what does it cover for the employee?
Alexa Greenberg:For California paid family leave, which is a component to the SDI program. It provides benefits to employees taking time to care for a seriously ill family member. Again, family member, the definition has been updated through legislation. Uh, I won't go into it or I think Karen will turn off my mic. Uh, if I recite definitions here, benefits are also available to parents who take time off of work to bond with a new child, just as of 1/1/21 qualifying exigency was also added as a new leave reason covered under California PFL. And then on the disability side, there is also taking time to, for your own health condition. So if an eligible employee has earned at least$300 during a 12 month based period from which SDI deductions were withheld, they can become eligible. They must also have lost wages for the reasons that I've mentioned and be employed or actively looking for employment. Although I will mention that, um, the act of search for employment requirement was suspended due to COVID. If an employee is eligible, employee may receive up to 60 to 70%, depending on income of their wages as defined in the California unemployment insurance code, which is earned five to 18 months during the base period. So one final note is that the two cannot be taken at the same time, but those are just some of the basic requirements.
Karen Batson:And I'll note,'cause Alexa just went through a lot of information on the basics of California that we also have, u m, a really great FAQ on the basics on our website. So I'll add that link to the description of this podcast for our l isteners so they can check out some of that info in writing. Now bill mentioned earlier private plans. S o, y ou k now, Lincoln offers a private plan for California, so we definitely should discuss it. What does California allow when it comes to a private plan? What is it called? What are some details we can provide our listeners?
Kristin Hostetter:Yep. So like several other States, California does allow employers to opt out of the state run program through an exemption process. I think we've mentioned a couple of times that all States are unique and that's true for California too. If an employer in California wants to, self-fund a private plan. Um, so it's not an insured program. That's not allowed in California, but if they want to, self-fund, it's known as a voluntary disability insurance program. So we'll add VDI to our alphabet soup, but VDI programs encompass both the state disability and the paid family leave and they have to offer some enhancement to the state plan. So it could be like an enhancement to a right or a benefit available to employees.
Karen Batson:So knowing, you know, it probably comes with a different process and some different requirements of the employer. What are the requirements that they'll have to go through if they want to a private plan or the VDI program?
Bill McShane:One of the first steps for an employer pursuing a private plan typically is to evaluate the financial feasibility of having a plan. Even if that's just to understand what it's going to cost them. Oftentimes people are focused on establishing a private plan when, you know, when there's a financial benefit, they're paying more into the state plan than they would to have a private plan, but that isn't always the case. Some employers are willing to incur some amount of costs for some of the other benefits of a private plan. Uh, so that was a long-winded answer. But you know, first off, usually a feasibility study or cost benefit analysis. Kristin mentioned that the plans have to have at least one benefit provision, uh, or aspect that's more favorable than SDI and PFL. Um, a couple other things that are, I guess, significant for employers to consider. There is a requirement of a vote in California and the employer has to get the majority of California employees to consent, to establish the private plan in writing in order to proceed with the EDD's application process. And then lastly, there are some financial requirements. The state requires a financial security and the form of a surety bond or a letter of credit or cash deposit. And the employer has to establish a separate account in which they essentially handle all of the income and expenses associated with the voluntary plan in particular, those employers that continue to take employee contributions. So there is a handful of, uh, requirements and considerations for employers.
Karen Batson:Now I know with Connecticut also has the voting process. And one of the questions that we receive there is from an employee population. It's just those who work in California, correct? Like if, if an employer has employees in multiple States, um, the vote would be just the California population. My understanding that, right?
Bill McShane:Yes,
Alexa Greenberg:That's correct.
Karen Batson:They're all nodding their head listeners. I just wanted to let you know, that was my bad asking. Yes or no question. Now some of these may feel like barriers kind of thinking of those administrative additions an employer might take on. So I think it's important for us to really also talk about the benefits of the private plan option. Um, so what are the benefits?
Kristin Hostetter:I think we could probably break the benefits up into employee benefits and employer benefits. So I think the most basic benefit for employees is there some enhancement to the SDI program. So they're getting something better than they would otherwise. They're also gaining kind of a streamlined claims experience. So their employer may elect to use, uh, a carrier or a TPA that's doing other benefits for them. So I think you could categorize that as an employer benefit as well, that better improved employee experience by having, you know, a single administrator handle VDI in conjunction with other things like short-term disability or unpaid leave administration. And then from an employer perspective, they'll also gain, you know, those, those benefits that their partner may have in terms of reporting and, and things of that nature.
Bill McShane:I would also add from, I guess it's from both an employer and an employee perspective, assuming the cost benefit analysis is such that the contributions that the employer is taking generate a surplus, the EDD provides the opportunity for the employer to spend those surplus contributions on the employees who are participating in the plan. So that oftentimes, you know, you'll see that in our customers enhancing the benefits of the voluntary plan, even beyond where they might have started or perhaps reducing the amount of employee contributions. But the state also does permit things like funding gym memberships, as an example, or providing a contribution to a, an employer's wellness plan. Again, specifically for those employees who are contributing and participating, but that, you know, that's definitely a benefit for those employers where there there's a surplus of contributions.
Karen Batson:Now, another frequently asked question is who pays for California SDI?
Kristin Hostetter:That's a good question. Um, employees pay for the SDI program. They pay a percentage of payroll up to a maximum taxable wage base. And this year it's 1.2% up to the max. I think Bill's mentioned some of the enhancements and employer could offer, but for a voluntary program, employers could fund part or all of that on behalf of employees.
Karen Batson:Do we see that happen with some of our California customers that they'll take on some of that cost?
Bill McShane:Uh, yes. I I'd say the majority of our California private plans still take some contributions. Many of them not, you know, not the maximum amount allowed by the state because they've generated a surplus, but we do have some employers that completely fund their California private plan.
Karen Batson:Now another question we seem to have pop up is, are California SDI or VDI, uh, taxable benefits?
Bill McShane:Yeah, this is an interesting question because generally speaking, the rule of thumb is that when employees are paying for benefits via contributions, those benefits are non-taxable. So in California, what makes this interesting is the state SDI and PFL program in particular, the PFL component is viewed federally as an unemployment benefit. And therefore it is taxable on a federal return. So, you know, SDI and PFL non-taxable from a state perspective in California, but PFL is actually taxable and reportable on an employee's federal return.
Karen Batson:Now, you know, we talked about some employer requirements in regards to considering a private plan, but just talking about the plan generally, what are some things employers need to do such as what they're responsible for notices when it comes to these programs?
Bill McShane:Yeah we've touched on a number of these and maybe I'll comment specifically on private plans and Alexa or Kristin can chime in, as it relates to the state program, there are wage statements that employers have to provide to the state of California that are a little bit different when they have a private plan, because they're specifically reporting the wages for the employees that are in the private plan, separate from anybody that may have opted out. And they're also reporting to the state, the amount of the EDD assessment, which is a charge that they're paying, you know, tied to having a private plan. On top of that, there are a number of filings that the employer is responsible for oftentimes in conjunction with their administrator. So there's an annual, uh, financial filing. There is an annual filing tied to the security deposit that they have on file and a number of other state required filings like that, that are at play with private plans.
Alexa Greenberg:I will just add that, um, employers also have to inform their employees of just laws and regulations pertaining to employment benefits and working conditions and such. So again, specifically, uh, with respect to SDI, there is a notice of rights for disability and then specific to paid leave. So notice for new hires and when an employee notifies the employer of the need to take time off for their own disability or for a PFL, they do have to provide them a certain, uh, certain notice.
Karen Batson:One of the topics I don't think we can avoid, but we should address is there might be heightened interest in California, um, given their COVID-19 paid sick leave mandate. Now for our listeners Lincoln, doesn't administer this program, but I was wondering if there's anything we can share around this leave.
Alexa Greenberg:Absolutely. So by way of background, the COVID-19 supplemental paid sick leave law does require California employers with more than 25 employees to provide employees up to 80 hours of COVID-19 related sick leave. Um, this is from January 1st, 2021 through September 30, 2021. So the law does apply to employees who cannot work because of their own condition. So an employee who is subject to a quarantine order related to COVID-19, or is experiencing COVID-19 symptoms to care for a family member subject to a quarantine order. Uh, it also includes caring for each child whose school is closed due to COVID and, um, last but not least for vaccine related symptoms, are vaccine, uh, arrangements. And again, we, as you said, Karen, do not administer the supplemental PSL law. Uh, but I would point out to employers that, uh, again, on the interaction and coordination, that they cannot require employees to use SDI before or in lieu of the PSL. And so an employee can apply for SDI after taking any PSL.
Karen Batson:Now we've mentioned a couple of times in this conversation that these programs kind of came to be much earlier on than what we're seeing today, right. With the new program every year when it comes to PFML. So I'm curious just from your opinions and perspective, um, do you think these new state programs have taken anything from California learning from one that's been around for so long?
Bill McShane:Yeah, I think this is interesting for sure. You know, one of the things that I think Alexa commented on earlier is the state of California each year evaluates the program and makes changes. And over time has actually consistently increased the weekly maximum that's provided for under the state programs. And then also in the last few years has increased the benefit percentage. Those two things, you know, based on having some surplus in the state program to spend. And then also from a PFL perspective, a desire for people to actually utilize the benefits, uh, the state believes in these programs. And so it's been interesting to see using a state like New York as an example that has a very low disability statutory benefit that when they introduced their PFL program, it does have a significantly higher, weekly, maximum associated with PFL. So that's one example. I would say that it appears there are some lessons being taken from the longstanding California program.
Kristin Hostetter:I would add to that, that there are pieces of the exemption process that we see mirrored in other States like Connecticut with the vote process. And, you know, one of the things that we often talk about and hope that new States that, that are introducing these programs do is that they'll reach out to some of the longstanding States that have had these programs like California. So, you know, they can take lessons learned both favorably and unfavorably unfavorably and apply them to new programs being introduced.
Karen Batson:Well, let me reverse that question on you. Do you, you know, with new States coming up and being looked at, do you think California will take learnings from them as they're being developed?
Bill McShane:The biggest question here that comes across my desk is with respect to a fully insured option. There are employers interested in having a private plan who, you know, for cost benefit or risk reasons, don't have the appetite to shoulder the responsibility and potential risk associated with the private plan. And some of the recently introduced States do allow both the self-insured and a fully insured option. So that, you know, from, from where I sit would be the most interesting thing to see if California ever moves towards allowing a fully insured private plan option.
Karen Batson:You know, one of the questions I always like to end on for our listeners is how do they stay informed even around California when it comes to changes that we've talked about, or, or just general dialogue, as we try and provide more information around programs?
Kristin Hostetter:I'll take that one. Karen. So I think some of the ways that we'd encourage you to stay informed about these sorts of changes is through Lincoln's Absence Advisor, um, which is our monthly compliance newsletter, where we, you know, provide updates on, on anything that's new or changed as well as the website and then our quarterly webinars.
Karen Batson:Nice plug. I always love a good Lincoln Absence Advisor plug. Thank you all for joining me. It was great conversation. Um, and hopefully you'll all. Come back again.
Kristin Hostetter:Thanks Karen.
Alexa Greenberg:Thank You.
Bill McShane:Thank you, Karen.
Karen Batson:Thank you everyone for listening and a special thank you to Kristen Hofstetter, Alexa, Greenberg and bill McShane for joining me today. We hope you liked today's episode, and we'll tell us by rating us sharing the episode or subscribing to Lincoln Absence Adviser on Apple, Spotify, or wherever you get your podcasts.
Disclosures:The information contained in this podcast is for general use and is not a substitute for the advice of an attorney or your human resource professional. Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations.