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August 3, 2021
2021-1461

Oregon law delays collection of paid family and leave insurance contributions to January 1, 2023

On July 27, 2021, Oregon Governor Kate Brown signed into law HB 3398, which delays the requirement for employers to begin making contributions to the state's paid family and medical leave insurance (PFMLI) from January 1, 2022 to January 1, 2023 and the date that employees may begin collecting PFMLI benefits from January 1, 2023 to September 1, 2023.

According to the fiscal notes for HB 3398, the delay in the program's implementation will allow the Oregon Employment Department (OED) to develop rules, policies and processes; hire necessary staff and set up facilities; plan outreach events to raise awareness about the program; and build a technology system that will fully support the PFMLI program.

Background

Oregon HB 2005, enacted in 2019, created a PFMLI program that is funded by both the employers and employees. Employers with fewer than 25 employees are exempt from paying the employer contribution. The OED administers the program.

Effective January 1, 2022 (now January 1, 2023), employers of 25 or more employees will begin paying at least 40% of contributions and withholding up to 60% of contributions from employee wages, up to a maximum 1.0% combined contribution rate on employee wages of up to $132,900 (indexed annually for inflation). Both the contribution rate and taxable wage limit will be determined annually by the OED.

Self-employed individuals may opt into the state PFMLI program.

The definition of wages is the same as for state unemployment insurance (SUI) contributions (ORS 657.105), but the taxable wage limit differs. If employers of fewer than 25 employees elect to pay the 40% employer portion, they may be eligible for a state grant.

Employers will file quarterly returns with the OED to report covered wages and contributions.

Employee notices

Employers are required to provide written notice to employees regarding their entitlement to PFMLI benefits.The OED will develop a model notice that employers may use.

PFMLI benefits

Starting January 1, 2023 (now September 1, 2023), up to 12 weeks of paid PFMLI benefits (14 weeks if pregnancy-related) will be available to eligible individuals, with an additional four weeks of unpaid leave possible. "Eligible employee" is defined as one who has earned at least $1,000 in wages during the base year. PFMLI benefits may be used for family, medical and safe leave purposes. The benefit amount will be determined based on the employee's average weekly wage during the base period, with the benefit amount potentially reaching 100% of the employee's average weekly wage, limited to a maximum state weekly benefit amount. PFMLI benefits must be used in coordination with unpaid leave taken under the state and federal Family and Medical Leave Act and are in addition to any employer-paid sick time, vacation leave or other paid leave. In any week in which an employee is eligible to receive workers' compensation or unemployment benefits, the employee is disqualified from receiving PFMLI benefits.

Eligible employees' positions of employment and benefits with the employer are protected while the employee is on leave if the employee has been employed by the employer for 90 days before commencing PFMLI leave.

The law allows employers to alternatively provide the same or better benefits as the PFMLI program at the same or lesser cost to employees through a private plan. Private plans must be approved by the Department and meet certain requirements. Employees covered by an approved private plan are not required to contribute to the state's PFMLI program.

Additional information concerning the Oregon PFMLI program is available here.

Ernst & Young LLP insights

Oregon joins a growing list of states (California, Colorado, Connecticut, District of Columbia, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Washington) that have enacted legislation to establish a state insurance program for PFMLI.

For the current PFLMI rates, read our special report here.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kristie Lowery (kristie.lowery@ey.com)
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)

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