Colorado moves forward on paid family and medical leave
Premium collection
Beginning Jan. 1, 2023, contributions are set at 0.9% of an employee’s covered wages up to the Social Security wage base, with employees and employers contributing equal amounts in most cases. Starting in 2025, the state may annually adjust the contribution rate (up to 1.2% of wages) based on the fund balance and usage rates. Premium deductions are post-tax, reportable in Box 14 of Form W-2 and labelled FAMLI.
Amended rules (7 CCR 1107-1) define the wages used to calculate premiums and outline employers’ obligations for collecting and remitting those premiums. Employers have to remit quarterly premiums by the end of the first month after each calendar quarter.
Employers with fewer than 10 employees, participating self-employed individuals and certain government employers are exempt from the employer contribution. Employer size is determined on registration and annually thereafter during the first quarter. All workers employed during 20 or more workweeks in the preceding calendar year are counted. For this purpose, an employer must count workweeks during which a worker was on paid or unpaid leave if the employer has a reasonable expectation that the employee will return to work. Exempt small employers must collect and remit employee contributions.
The Colorado Department of Labor and Employment (CDLE) will notify covered employers about required premium amounts at the start of the month when the premium is due. Employers may opt to have their payroll vendor or other representative receive the notice, which may be sent electronically or by mail. CDLE will post online a schedule of due dates and instructions for remitting premiums. Employers with an approved private plan will not receive quarterly notifications of premium liability from CDLE.
Place of employment
The law applies based on where an employee works, regardless of residence. Under the rules (7 CCR 1107-1.5.4B), an employee’s wages are subject to premiums if any of the following apply:
1. The employee’s entire service is performed within Colorado.
2. The employee’s service is performed both within and outside of Colorado, but the service performed outside of the state is incidental to the employee’s work within Colorado — for example, is temporary or transitory in nature and consists of isolated transactions.
3. Services are not localized in any state, but some of the services are performed in Colorado, and either:
A. The base of operations is in Colorado, or if the employer has no base of operations, then the place from which services are directed or controlled is in Colorado.
B. The base of operations or place from which some part of the service is directed or controlled is not in any state where part of the service is performed, but the employee’s residence is in Colorado.
Local government employer participation in FAMLI
Amended rules (7 CCR 1107-2) provide a process for local government employers to provide written notice to CDLE declining to participate the FAMLI program. (Local government employers do not include entities that have any employees in the state personnel system or have received advance payment of FAMLI premiums under 2022 Ch. 170, HB 22-1133.) The local government’s ability to decline participation (or to reparticipate) is subject to a vote by its governing body.
Employees of local governments declining participation may voluntarily elect coverage as individuals at the 0.45% contribution rate, starting in 2024. This right of self-election requires a three-year commitment. Additional guidance is expected in 2023. Employers declining participation may (but are not required to) provide administrative support to employees who elect coverage — including but not limited to deducting premiums from wages and remitting premiums and wage reports to CDLE on the employee’s behalf.
A government employer must reconsider its decision to decline participation at least every eight years. A local government employer that declines but later elects FAMLI participation must remain in the program for a minimum of 12 complete calendar quarters. Regardless of FAMLI participation, local government employers have specific notice and posting obligations. Posters must be in English and any other primary language of at least 5% of workers.
Private plans
Private-sector employers can opt out of participation in the state-run program by obtaining approval for a private plan. Employers that have approved private plans with an effective date of Jan. 1, 2024, or earlier will receive reimbursement of premiums paid in 2023 (minus the initial $500 administrative fee). Approved private plans with a later effective date will not be reimbursed. Reimbursed employers must reimburse employees for premiums collected in 2023 unless the approved private plan’s terms provide otherwise.
Adopted rules (7 CCR 1107-5) detail private plan requirements and the application process. Approved plans generally take effect 60 days after the application date or later. For a private plan to take effect on Jan. 1, 2024, the application must be approved by Oct. 31, 2023. Applications are reviewed on a rolling basis and must include a copy of the plan or policy, a surety bond equal to one year of total premiums (if self-insured) and the initial administrative fee, among other requirements.
Other provisions applicable to private plans include:
- Renewals. Approvals expire after eight years from the plan’s effective date. Renewals must be submitted 60 days before expiration.
- Separate account. Self-insured plans must maintain employee contributions in a separate account from which benefits and administrative costs are paid.
- Annual employer attestation. Every November (starting in 2024), employers must submit an attestation confirming that contact information is accurate and the plan continues to satisfy all requirements.
- Annual fee. Beginning in 2025, employers with approved private plans will owe the FAMLI Division an annual maintenance fee to cover the prior year’s administration costs.
Employer considerations
All employers (including local government employers that decline coverage) must register via My FAMLI+ Employer, the portal for reporting wage data, paying premiums, applying for a private plan and completing other actions. Employers with established paid leave programs that don’t opt for a private plan will need to determine how to coordinate the state program with their existing plans (see the coordination-of-benefits rules, 7 CCR 1107-4). Multistate employers may need to establish a process for coordinating with other states offering similar programs.
Employers should ensure proper setup of payroll systems for withholding post-tax premiums and reporting them for state and federal tax purposes. The FAMLI Division will send a Form 1099-G to employees who receive FAMLI benefits. The form will report FAMLI benefits in Box 1 as unemployment compensation. FAMLI benefits are not subject to state income tax, but IRS has yet to rule on whether they are subject to federal taxation.
Posters and notices provided by the FAMLI Division are available in the Employer Toolkit. Employers must display the workplace poster in a prominent location by Jan. 1, 2023, and provide a copy on hiring a new employee and on learning of an employee event that triggers eligibility for leave.
Related resources
Non-Mercer resources
- FAMLI website
- CO Rev. Stat. §§ 8-13.3-501 to 8-13.3-524 (Casetext.com)
- Adopted regulations (FAMLI)
Mercer Law & Policy resources
- 2022 state paid family and medical leave contributions and benefits (Jan. 19, 2022)
- Roundup of selected state health developments, third-quarter 2021 (Oct. 22, 2021)
- Colorado voters approve paid family and medical leave law (Nov. 10, 2020)