Explainer: Paid Leave Benefits and Funding in the United States

Wage Replacement, Duration, and Funding in U.S. State Paid Family and Medical Leave Programs, as of July 1, 2021
Brief
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July 1, 2021

As of July 1, 2021, six states across the country—California, Massachusetts, New Jersey, New York, Rhode Island, and Washington—and the District of Columbia (D.C.) have paid family and medical leave programs in place that make paid leave benefits available to workers. Three more states—Colorado, Connecticut, and Oregon—are slated to begin offering paid leave benefits to workers between January 2022 and 2024.

Policymakers often have questions about paid family and medical leave program design, including the benefits to offer and the method of funding a comprehensive program. This explainer is meant to be a resource in answering those questions by summarizing and comparing existing state programs. It breaks down the wage replacement people receive, the duration of time for which benefits are available, and the financing of the programs. It is meant as a companion to our explainer on Federal FMLA and State Paid Leave Program Usage and Coverage. It shows the value that state paid leave programs deliver for a small cost and underscores the viability of a national paid family and medical leave program designed as social insurance.

The COVID-19 pandemic has proven the value of paid family and medical leave programs and made more clear than ever the urgent need for the United States to adopt a national paid family and medical leave program. The pandemic and the care crises it has caused may also encourage states to adopt programs of their own. Colorado became the first state to pass a new paid leave program since the beginning of the pandemic. Voters there approved Proposition 118 with 57 percent of the vote—the first state to pass a paid leave program by voter initiative instead of through the legislature.

Paid Leave Wage Replacement Supports Workers and Families

Paid leave prevents workers and their families from falling down a financial rabbit hole when breadwinners need time away from their jobs to care for a loved one or address their own serious health issue. Brandeis University researchers estimate a typical worker will forgo more than $9,500 in lost wages to take 12 weeks of family or medical leave without pay.

State paid leave programs address the income shock associated with unpaid leave by replacing a portion of a worker’s wages from a state-administered paid family and medical leave fund.

The country’s first two paid family leave programs, in California and New Jersey, began by replacing a fixed percentage of a worker’s typical wages when the worker needed to take paid family or medical leave (55 percent and 67 percent, respectively); each state has subsequently raised their wage replacement rates, California to 60 percent for most workers and 70 percent for the lowest-wage workers, and New Jersey to 85 percent. Rhode Island (60 percent) and New York (escalating incrementally from 50 percent at the program's start in 2018 to 67 percent in 2021) also take this fixed percentage approach. A weekly cap on the benefits a worker can receive functions to provide a declining share of replaced wages to higher-wage workers, recognizing that they are more likely to receive supplementary benefits from their employers and more likely to have savings to use during a period of unpaid leave.

Newer programs have adopted a sliding-scale approach to paid leave benefit payments and provide higher wage replacement to lower-wage workers; this helps to make leave more affordable and accessible to people who are often living paycheck to paycheck. Washington state’s program, which began paying benefits in January 2020, pioneered progressive wage replacement, replacing 90 percent of wages for low-wage workers and a blended rate for everyone else. D.C.'s program, which began making benefits available on July 1, 2020, also adopts this sliding scale model, providing low-wage workers with 90 percent of their typical wages and a blended rate for middle- and higher-wage earners. Massachusetts' program, which made benefits available for most purposes on January 1, 2021 and now makes benefits fully available for all covered purposes as of July 1, 2021, replaces 80 percent of wages for lower-wage workers and offers a blended rate for others. The newest, soon-to-be-implemented state programs also embrace this model—Oregon will provide low-wage workers with 100 percent of their wages; Connecticut will provide 95 percent; and Colorado will provide 90 percent. In these states, middle-wage workers typically receive roughly 60 percent to 70 percent of their wages, and higher income workers receive less.

Figure 1 shows the approximate benefit that workers at different wage levels, can expect to receive in each state's current or forthcoming program. Additional scenarios are illustrated in Table 1 (click here). Table 1 shows approximate wage replacement for workers who are paid minimum wage, average weekly wages or fractions or multiples of the state average weekly wage in each state. Notes [1]-[10] below provide more information about wage replacement rates and links to state-specific resources.

In order to compare apples-to-apples, Figure 1 (below) and Table 1 (here) calculate benefits using the 2021 minimum wage and the state average weekly wages that will be used to calculate paid leave, workers' compensation or unemployment benefits in 2021; this means that, for programs that have not yet been implemented, benefit amounts shown are lower than they will be at the time of implementation because of forthcoming scheduled minimum wage increases and likely increases in the state average weekly wage.

Paid Leave is Funded Sustainably and Affordably

State programs are funded through small, mandatory payroll deductions from employers, employees or both. In each state other than New York, the money is pooled into a statewide fund from which benefits are paid; in New York, private insurers and a state insurance fund, similar to a public option, exist side-by-side.[11]

The programs in California, New Jersey, New York and Rhode Island have funded personal medical leave programs through Temporary Disability Insurance (TDI) in this way for decades, and each added paid family leave benefits funded in a similar way in 2002 (California), 2008 (New Jersey), 2013 (Rhode Island), and 2016 (New York).

In July 2019, Washington state and D.C. started collecting the payroll deduction premiums to fund their new programs; Washington’s began paying benefits in January 2020 and D.C. began paying benefits in July 2020. Massachusetts premium collections began in October 2019 and benefits became available to workers in 2021 over a six month phase-in: personal medical leave, military exigency leave, and new child bonding leave began in January, and family caregiving leave began in July.

Connecticut began collecting premiums for its new program in 2021 and benefits will be available in 2022. Oregon, and Colorado will begin collecting premiums in 2022 and 2023, respectively, and will begin paying benefits in 2023 and 2024. States need to build up their funds before beginning to make wage replacement benefits available to workers, hence the lag time between the passage of legislation, the collection of premiums and the availability of benefits to workers.

Table 2 shows the contribution levels for employees and employers and the taxable wage base on which premiums are calculated. To provide context for what these contributions "buy" in terms of the paid family and medical leave available to workers, Table 3 provides each state's duration of paid leave.

Notes [12]-[20] below provide more information about payroll tax rates, benefit caps and duration, along with links to state-specific resources.

As detailed in our Federal FMLA and State Paid Leave Program Usage and Coverage explainer, the family caregiving portion of state paid leave programs allows workers to take paid leave to care for a range of family members—parents, spouses, children, and grandparents in all; and grandchildren, siblings, parents-in-law, and domestic partners in most—and four newer or newly expanded laws also include “chosen” family members to whom the worker is related by blood or affinity. The funding for the programs is (or, for new or expanded programs is anticipated to be) sufficient to cover all the caregiving purposes the laws include. Experience shows the inclusion of extended family members does not add appreciably to program costs and that broad family coverage is particularly important to ensure that people of color who disproportionately have extended family care responsibilities, LGBTQ people, and people with disabilities and their caregivers can realize the promise of paid leave programs.

State models show that paid leave provides substantial financial security to working people, at minimal individual cost, usually for an adequate number of weeks. Federal lawmakers can use these parameters to help design a national paid family and medical leave program.


Acknowledgments

Better Life Lab Deputy Director Haley Swenson, Program Assistant Jahdziah St. Julien, Research Assistant Kelly Rolfes-Haase and former New America intern, Leah Crowder, assisted with the development of an earlier version of this explainer.

Footnotes

[1] In California, the benefit amount depends on highest quarter of earning during a Base Period (first four of last completed calendar quarters before starting date of claim). If the highest quarterly earnings are less than $928.99, weekly benefit is $50; between $929-$5,741.66, weekly benefit is 70% of earnings; above $5,741.66, weekly benefit is 60% of earnings. See https://www.edd.ca.gov/Disability/Calculating_PFL_Benefit_Payment_Amounts.htm and a table of benefits by prior quarterly earnings.

[2] In New Jersey, as of July 1, 2020, claimants are paid 85% of their average weekly wage. In 2021, the maximum weekly benefit is $903 per week. See https://myleavebenefits.nj.gov/labor/myleavebenefits/worker/fli/index.shtml?open=caregiver. Prior to July 2020, claimants were paid two-thirds (2/3) of their average weekly wage, up to a maximum of $667 per week.

[3] In Rhode Island, the wage replacement is equal to 4.62% of the wages paid to employee in the highest quarter of Base Period. In 2021, the maximum benefit is $887.00 and minimum benefit is $98.00. See http://www.dlt.ri.gov/tdi/tdifaqs.htm.

[4] In New York, in 2021, the wage replacement rate is 67% of employee's weekly wage up to 67% of the state average weekly wage (SAWW). The maximum benefit in 2021 is $972. See https://paidfamilyleave.ny.gov/benefits

[5] In Washington, the wage replacement rate is 90% of employee's wage up to 50% of SAWW plus 50% of employee's wage over 50% of SAWW. Maximum benefit in 2021 is $1206 (90% of SAWW). Minimum benefit is $100/week. See http://lawfilesext.leg.wa.gov/biennium/2017-18/Pdf/Bills/Session%20Laws/Senate/5975-S.SL.pdf (page 13).

[6] In the District of Columbia, the wage replacement calculation is based on the minimum wage. The replacement rate is 90% of employee's wage up to 150% of DC's minimum wage x 40 plus 50% of employee's wage over 150% of DC's minimum wage x 40. Maximum benefit is $1000/week before October 1, 2021 and will be increased according to the consumer price index (CPI) thereafter. See https://code.dccouncil.us/dc/council/laws/21-264.html.

[7] In Massachusetts, the wage replacement rate will be 80% of employee's wage up to 50% of SAWW plus 50% of employee's wage over 50% of SAWW. Maximum benefit will be $850/week for first year (January 2021) to gradually increased to 64% of SAWW. See https://www.mass.gov/regulations/458-CMR-200-department-of-family-and-medical-leave (page 26).

[8] In Connecticut, the wage replacement calculation is based on the minimum wage. Replacement rate will be 90% of employee's wage up to minimum wage x 40 plus 60% of employee's wage over minimum wage x 40. Maximum benefit is minimum wage x 60. See https://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selBillType=Bill&bill_num=SB-1 (page 11).

[9] In Oregon, the wage replacement rate will be 100% of employee's wage up to 65% of SAWW plus 50% of employee's wage over 65% of SAWW. Maximum benefit is 120% of SAWW and minimum benefit is 5% of SAWW. See https://olis.leg.state.or.us/liz/2019R1/Downloads/MeasureDocument/HB2005/Enrolled (page 5).

[10] Colorado's wage replacement formula follows Washington state's: 90% of employee's wage up to 50% of SAWW plus 50% of employee's wage over 50% of SAWW. The maximum benefit will be calculated at 90% of SAWW after January 1, 2025. For the program's first year, the maximum benefit will be $1100; the statute does not specify a minimum benefit. See https://www.sos.state.co.us/pubs/elections/Initiatives/titleBoard/filings/2019-2020/283Final.pdf (page 6).

[11] Some states permit employers to self-insure or to purchase third-party insurance; the state regulates and enforces this process but, with the exception of New York, very few employers participate in these voluntary plans and participate in the state fund.

[12] In California, the law was passed in 2002, implemented in 2004, and has been amended multiple times. The maximum length of family leave increased from 6 to 8 weeks on July 1, 2020. See http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB83. For tax rate and wage base information, see https://www.edd.ca.gov/Payroll_Taxes/What_Are_State_Payroll_Taxes.htm. Effective January 1, 2021, individuals will be eligible to receive up to 6 weeks of military exigency leave. See https://www.edd.ca.gov/pdf_pub_ctr/de2530.pdf.

[13] In New Jersey, 2019 legislation made changes to the state paid family leave program. Some changes took effect in January 2020 and others took effect on July 1, 2020. For tax rate and wage base information for family leave, see https://myleavebenefits.nj.gov/worker/fli/ and for TDI, see https://myleavebenefits.nj.gov/worker/tdi/ and https://myleavebenefits.nj.gov/labor/myleavebenefits/employer/index.shtml. Note that the TDI contribution for employers varies (for 2021, between $36.20 and $271.50 on the first $36,200 of an employee’s earnings).

[13] In Rhode Island, for tax rate and wage base information, see http://www.dlt.ri.gov/lmi/news/quickref.htm. Note that Rhode Island allows for a maximum of 30 weeks of combined annual disability and family leave. See http://www.dlt.ri.gov/tdi/tdifaqs.htm.

[14] In New York, for tax rate and wage base information for family leave, see https://paidfamilyleave.ny.gov/cost. The taxable wage base cap is equal to the state average weekly wage. Employers are required to provide TDI and may take up to a 0.50% payroll tax from employees to cover benefits (but only up to $0.60 per week). See http://www.wcb.ny.gov/content/main/offthejob/db-overview.jsp. New York's paid family leave can be used for military exigency leave.

[15] In Washington, for tax rate and wage base information, see https://resources.paidleave.wa.gov/premiums. The taxable wage base cap is the Social Security cap. Small businesses with fewer than 50 employees are not required to contribute to premiums but are incentivized to do so. In terms of duration, some individuals can qualify for up to 16-18 weeks combined leave (e.g., individuals who experience complications in pregnancy may be eligible for 18 weeks of leave). Washington's law includes military exigency leave. See https://paidleave.wa.gov/find-out-how-paid-leave-works/.

[16] In the District of Columbia, for tax rate information, see https://dcpaidfamilyleave.dc.gov/employers/. D.C. allows for a maximum of 8 weeks of annual family and medical leave. See https://dcpaidfamilyleave.dc.gov/workers/.

[17] In Massachusetts, for tax rate and wage base information, see https://www.mass.gov/info-details/family-and-medical-leave-contribution-rates-for-employers. Small businesses with fewer than 25 employees are not required to contribute to premiums. The taxable wage base cap is the Social Security cap. Note that the maximum length of leave is capped at 26 weeks per year (and maximums of 12 weeks of family leave, 20 weeks of medical leave, and 26 weeks to care for a wounded service member). See https://www.mass.gov/guides/workers-guide-to-paid-family-and-medical-leave#-worker-contribution-rates-.

[18] In Connecticut, for tax rate and wage base information, see https://www.cga.ct.gov/2019/ACT/pa/pdf/2019PA-00025-R00SB-00001-PA.pdf. Note that employees will make contributions starting January 1, 2021. The taxable wage base cap is the Social Security cap. Note that the maximum annual length of leave is 12 weeks plus an additional 2 weeks for a health condition resulting from pregnancy. Connecticut's law includes both military exigency leave and "safe" leave for survivors of family violence. Connecticut caps military exigency leave at 26 weeks per two-year period.

[19] In Oregon, for tax rate and wage base information, see https://www.dwt.com/-/media/files/employment-advisor/hb2005.pdf?la=en&hash=AFAC8E007A617F3D03B28DA8893EAF97. The taxable wage base cap is the Social Security cap. Oregon’s law includes “safe leave” for survivors of domestic violence, sexual assault and stalking. Small businesses are not required to contribute to the program, similar to Washington state and Massachusetts.

[20] In Colorado, the statute prescribes tax rate and wage base information. The taxable wage base is the Social Security cap. Small businesses are not required to contribute to the program, similar to Washington state, Massachusetts and Oregon. Colorado's law includes both military exigency leave and "safe" leave for survivors of domestic violence, stalking and sexual assault. https://www.sos.state.co.us/pubs/elections/Initiatives/titleBoard/filings/2019-2020/283Final.pdf.

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