Paid Family Leave Employee Contributions: Payroll and Withholding

October 2, 2017
New York's Paid Family Leave is designed as an employee-funded program, subject to rate limits and an annual cap.

New York's Paid Family Leave is designed to be employee funded through payroll deductions, subject to rate limits and an annual cap. Another option is for employers to pay PFL premiums themselves. Here we focus on collecting premium through payroll deductions and the details on how it works.

Withholding Rates and Limits

The PFL rate is a single-tier community rate calculated as a percentage of employees' weekly wages, subject to an annual maximum. There are no cost variations based on age, gender, geographic location or any other demographic factor.

For 2018, the PFL contribution rate is 0.126 percent, capped according to the New York State Average Weekly Wage. For 2018, the annual cap is $85.56 (0.126 percent of the annualized NYAWW). For employees who earn less than the NYAWW, employers will withhold payroll contributions throughout the year. For higher wage earners, employers must halt payroll deductions once the maximum is reached.

For PFL contributions, wages are defined as all reported wages including commissions, bonuses, overtime, tips, and so on. All contributions are taken post-tax.

Pre-Funding With Early Contributions

PFL premiums will be paid to the insurance carrier along with the employer's premiums for Disability Benefits Law, known as DBL. As a result, PFL premiums may be due before employee contributions have been withheld. New York law therefore has allowed employers to withhold early contributions to help pre-fund PFL since July 1, 2017. (Note, however, that carriers typically can't receive premium before the PFL rider goes into effect.)

Remember, an employer can choose to fund all or a portion of PFL itself, without collecting payroll deductions. Employers may not retroactively collect PFL contributions under any circumstances.

Returning Employee Contributions

If an employee leaves after PFL contributions have been withheld but before Jan. 1, 2018, the employer is not required to refund the contributions. If an employer collects payroll deductions for PFL and for any reason does not offer a PFL policy, the employer must return those funds to employees.

No Waiting Period for Withholding

The State of New York stipulates a waiting period for PFL eligibility, but this does not affect the timing for payroll deductions. Full-time employees (those who work 20 or more hours per week) are eligible for New York PFL after working for the same employer for 26 weeks. Part-time employees are eligible after 175 days. Note: PFL eligibility requirements differ from DBL.

To help fund the PFL program, employers should start PFL payroll deductions from the date of hire. However, employers cannot collect PFL contributions from an employee who is not yet eligible for PFL while that employee is out on DBL. For employees who have passed the eligibility waiting period, employers can continue to collect both PFL and DBL contributions while the employees are out on PFL or DBL.

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