January 7, 2021 Connecticut reminds employers to register for paid family and medical insurance program, start employee payroll deductions on January 1, 2021 The Connecticut Paid Leave Authority is reminding employers with one or more employees that they must now register with the Authority to comply with the state's statute governing paid family and medical leave insurance (FMLI). Payroll deductions for FMLI contributions are required to start with the first paycheck on or after January 1, 2021, and all covered employers are required to deduct 0.5% of taxable wages. (Email subscription, 12-30-2020.) Businesses that fail to deduct FMLI contributions from employees' wages are liable for the requisite contribution amounts and may be subject to interest and penalties. If an employer does not withhold enough from an employee's wages, the Connecticut Department of Labor allows for a very limited catch-up period of no longer than the first two quarters of 2021. Catch-up contributions may not exceed 1% of an employee's pay per payroll period. If, after continued efforts, an employer fails to submit employee contributions, the Authority is empowered under the law to pursue the contributions owed. (Employer frequently asked questions.) FMLI contributions are due quarterly with payments required no later than 30 days after the end of each quarter. The first payment is due April 30, 2021. Program the result of 2019 legislation In 2019, Connecticut SB 1 (Public Act 19-25) created an FMLI program that is 100% funded by employees through payroll deduction. (Governor's press release, 6-25-2019; EY Tax Alert 2019-1194, 6-28-2019.) Starting January 1, 2021, employers must withhold 0.5% of covered wages up to the 2021 Social Security wage limit of $142,800. Up to 14 weeks of paid FMLI benefits will be available to eligible individuals starting January 1, 2022. Sole proprietors and independent contractors may opt into the FMLI program. The law allows employers to alternatively provide the same or better benefits as the FMLI program at the same or lesser cost to employees through a private plan. Private plans must be approved by the state and meet certain requirements. Employees covered by an approved private plan are not required to contribute to the state's FMLI program. Starting July 1, 2022, employers are required to provide written notice to new employees upon hire, and annually to all employees, about their entitlement to FMLI benefits. The Act also creates a "non-charge" against an employer's state unemployment insurance (SUI) account for the payment of benefits to employees temporarily hired to replace those on FMLI leave. This provision allows employers to lay off temporary employees hired due to an FMLI event without increasing their unemployment insurance tax rate. Laid-off employees are eligible for unemployment insurance benefits, assuming they meet the unemployment insurance benefit requirements. For more information on the state's FMLI program, go here. Ernst & Young LLP insights Connecticut joins a growing list of states (California, District of Columbia, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Washington) that have established paid family and medical leave insurance programs. While Connecticut's program is funded by employees only, other states vary in whether employees solely fund the cost (e.g., New York), employers and employees share in the cost (e.g., Washington), or employers shoulder 100% of the cost (e.g., District of Columbia). For the 2021 paid family and medical leave insurance states and rates, see EY Tax Alert 2020-2831, dated 12-10-2020. ———————————————
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