Proposals for paid family and medical leave at the federal level historically haven’t had enough support to become law. Many states have added paid leave mandates since 2017, creating a challenge for multistate employers seeking to deliver consistent benefits to their entire workforce. To address this challenge, lawmakers in the House Paid Family Leave Working Group recommended four ideas for future legislation that could drive consensus among lawmakers to provide more families with more paid leave. It is important to understand the state paid leave patchwork and updates on bipartisan legislation—including an interstate paid leave network proposal and a temporary employer tax credit that could be expanded.

State Paid Family and Medical Leave Laws

Thirteen states and D.C. have mandatory paid family and medical leave programs described in this chart from A Better Balance. Program design varies by state. In state-administered programs, workers are covered through a state fund (described further below). Employers that offer their workers equivalent or more generous leave can opt out by applying for state approval.

Generally, the mandatory programs are state operated. Voluntary programs operate via state- regulated group leave insurance products.

Lack of Consistency Challenges Employers

Large employers encounter substantial challenges as they try to comply with different state laws. Criteria vary greatly and can be complex to measure. The following aren’t consistent between states:

  • How the programs are funded. In some states, workers cover the full cost via payroll deduction as a percentage of wages. In other states, the programs are funded by both employer and employee contributions via payroll deduction as a percentage of wages.
  • Wage replacement limit. The calculation can be tied to the statewide average weekly wage (e.g., replace 90% of a worker’s average weekly wage up to an amount equal to 50% of the statewide average weekly wage and 50% of a worker’s average weekly wage above that state average).
  • Measuring employee eligibility. Eligibility can be based on earning a minimum total wage during a base period or working for a minimum length of weeks or months.

For a visual representation of complexity across states, this infographic prepared by Seyfarth’s Leaves of Absence Management and Accommodations team, in conjunction with the American Benefits Council, shows four key paid family and medical leave substantive areas: (1) qualifying absences, (2) covered family members, (3) length of benefits and duration of leave, and (4) amount of pay. The infographic’s footnote shows that the four key areas are from a list of 31 possible substantive criteria.

Paid Family Leave Insurance Model

Currently, eight states have laws allowing insurance companies to sell group paid family leave insurance for income replacement during a leave for caregiving. Employers can voluntarily purchase family leave insurance from an insurance carrier. Employers in these states may also often rely on insurance carriers to help them navigate various state paid leave laws and administer private paid leave benefits to their workforces.

In 2023, Alabama, Arkansas, Florida, Tennessee and Texas enacted laws allowing the sale of group family leave insurance policies to employers. A full list of states allowing paid leave insurance products is described by Mercer.

Paid Family and Medical Leave Developments in Congress

In 2023, the House Paid Family Leave Working Group gathered stakeholder feedback from states, employers and insurance companies. On January 5, 2024, the House Paid Family Leave Working Group released a legislative framework that could be viable in Congress based on stakeholder feedback.

The four proposals would:

  1. Coordinate and harmonize paid leave benefit structures across states. An interstate plan would allow multistate employers to design uniform paid leave programs nationwide. The proposal would develop a system for states to coordinate and exchange data with each other.
  2. Create a pilot program for states that want to set up a new paid leave program.
  3. Allow paid leave insurance pooling for small employers with the goal of pooling risk and lowering the cost of providing paid family leave. This is intended to incentivize businesses with low-income workers to join.
  4. Expand tax credits to offset employers’ costs. Many employers aren’t aware of an existing, temporary tax credit or how to use it. The proposal described below would make this tax benefit, set to expire in 2025, permanent. This tax benefit is an up to 25% tax credit for providing employees with paid leave. Employers can claim a 12.5% tax credit for offering paid leave at 50% wage replacement rate and a 25% credit by offering 100% wage replacement.

The fourth point of the framework has been introduced in Congress as the Paid Family and Medical Leave Tax Credit Extension and Enhancement Act (S.3680). This bill would amend the Internal Revenue Code of 1986 to enhance the paid family and medical leave credit in the following ways:

  • Make tax credit permanent. This bill would make the temporary tax benefit expiring in 2025 permanent, providing more certainty for employers. Originally enacted in 2017 as a pilot program, the tax credit has been renewed twice. The lack of permanence is a turn off to employers that don’t want to add a costly benefit if they can’t count on the tax benefit going forward. Employers want more certainty before they offer paid leave.
  • Expand eligible employers. Under current law, multistate employers are disqualified if they’re mandated by one state but not another state where they do business. This bill would allow those employers to qualify for the credit if they provide paid leave in those states where it’s not required.
  • Change employee eligibility. Under current law, employers must offer paid leave to employees who work less than 20 hours a week. This bill would allow employers to establish a 20-hour work week minimum for paid leave eligibility.
  • Include employers using the insurance model. This bill would allow employers that pay for paid leave insurance to receive the tax credit.

Lawmakers don’t have an estimate yet of the tax credit cost or the amount it would reduce federal tax revenue, so right now it’s unclear whether a permanent tax credit would be sustainable into the future.

Legislation to Expand Unpaid FMLA

The Family and Medical Leave Act (FMLA) provides unpaid leave with job protection at companies with over 50 employees. Eligible employees can use FMLA for up to 12 weeks in a 12-month period to care for an immediate family member (defined as a spouse, child under 18 years old or parent) who has a serious health condition and for bonding after birth, adoption or foster placement. (Note: This is a simplified description. See the DOL’s Employer Guide to FMLA for more details.) Bills have been introduced that would expand FMLA by permitting employees leave to care for more people who have serious health conditions, but these have gained no further momentum in Congress yet.

  • The Grandparent-Grandchild Medical Leave Act (H.R.2528) would allow employees leave to care for an adult child, a grandchild or a grandparent who has a serious health condition.
  • The Caring for All Families Act (H.R.789 and S.242) would allow employees leave to care for a domestic partner, a parent-in-law, an adult child or another related individual who has a serious health condition. This act would create a “parental involvement and family wellness leave” for employees to attend their children’s and grandchildren’s educational and extracurricular activities or meet family care needs.

Wait and See

Employers of all sizes want to offer paid leave, but cost and staffing present hurdles, according to the House Paid Leave Working Group briefings. Congress is considering expanding a tax credit to offset employer costs that expires in 2025. Congress is also exploring ways to establish consistency between state mandates that would make it easier for employers to comply with varying state laws. Another proposal aims at allowing employees unpaid leave to care for a wider range of family members with medical needs. We will be watching for Congress to move past this exploratory phase in the coming years.

 Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.

Jenny Gartman, CEBS

Senior Content & Information Specialist at the International Foundation Favorite Foundation Member Service: Personalized Research Service Benefits Topics That Interest Her Most: Mental health and retirement security Personal Insight: Jenny likes spending time with family, knitting, reading memoirs and going for walks around the neighborhood.

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