How Washington State’s Paid Family Leave Act Will Affect Credit Unions

Find details on how the benefit works, and what credit unions need to consider in light of the new law.

7/14/17

On July 5, 2017, Gov. Jay Inslee signed Washington State’s Paid Family Leave bill. This new law will revolutionize how Washington businesses, including credit unions, provide paid leave benefits to employees who take family medical leave. This program is similar to the state’s unemployment insurance benefit for employers with 50 or more employees in that both the employee and the employer will pay a premium to participate (or the employer can have its own equivalent plan).

Credit unions already offer generous paid leave benefits and will need to reassess and likely revise these benefits in light of this law and related costs, and also in light of the previous Paid Sick Leave law, which offers different benefits and protections that will become effective in January 2018. The benefits provided by these two statutes overlap and will have to be considered together before 2018.

While the payment of premiums will start in 2019, the benefit will not be offered until January 2020.

Benefit

Nearly all employees, private and public sector, who work for employers with more than 50 employees in Washington will be eligible to receive up to 12 weeks of paid time off for the birth/placement of a child, for the employee’s own serious health condition, or to care for a family member with a serious health condition.

The benefit amount varies due to a calculation based on the employee’s rate of pay and the state’s average weekly rate (currently $1,082 or $56,264 annually). Employees who earn less than the state’s average weekly rate will receive the equivalent of 90 percent of the employee’s weekly wage. Employees who earn more than the state’s average weekly rate will receive a benefit calculated as 90 percent of the employee’s weekly wage, up to 50 percent of the state’s average weekly rate, plus 50 percent of the employee’s average weekly wage that is greater than the 50 percent of the state’s average weekly rate, up to a maximum $1,000 per week for 2020.

To be eligible, an employee must have worked 820 hours (approximately 4.5 months) during the qualifying period (first four of the last five calendar quarters). For the most part, only employees actually working in Washington will be eligible for this benefit.

Premiums

Employees will pay a weekly premium toward the paid leave benefit, as will employers. Under the law, the total premium charged for each employee will be equal to 0.4 percent of the employee’s wages up to the maximum limit that is equal to the maximum wages subject to taxation for Social Security as set by the SSA.

The law outlines the percentage of the employer mandatory contribution for both the family leave and the medical leave premiums, and also allows an employer the option to pay the full premium. The employee will pay about 63 percent and the employer about 39 percent of the premium. For an employee who earns $50,000 in annual salary, the employee would pay $2.42 a week and the employer would pay $1.42 a week, providing the employee with a weekly paid benefit of approximately $703 when leave is taken.

Reinstatement Rights

As under the current WA Family Medical Leave Act and FMLA, most employees who meet certain requirements, take family medical leave, and obtain benefits under this Act will be entitled to return to the employee’s position held prior to leave or to an equivalent position. There are some exceptions for shorter term employees and key employees.

Taxation

At this time, it is not clear whether the Internal Revenue Service will determine that these paid family leave benefits will be subject to federal income tax. Most likely, the benefit will be subject to taxation, and the employees will be able to elect that the tax be deducted and withheld from the payment of benefits. The amounts withheld will remain in the family medical insurance account created by the state treasurer and then will be transferred to the IRS.

Editor’s note: Kelly R. Tilden, employment advice and litigation lawyer at Farleigh Wada Witt, and Chair of the firm’s Employment Practice Group, is the author of this article.