In January the New Jersey state legislature passed a law that makes Family Leave Insurance and Temporary Disability Insurance more generous, and gives more workers the right to access the programs. When the new FLI and TDI rules take effect in July, 2020, the changes could have a big impact for both employers and employees.
One company staying on top of these changes is Arch Insurance, a Jersey City-based agency. The law offers employers the option of using the state-run insurance program or using a private provider of family leave and disability insurance instead. Arch is one of those private providers, and Arch vice president Thomas Foschino says there are several reasons businesses might want to use a private insurer instead.
Foschino, along with his colleague James Iannicelli, will give a webinar presentation for the New Jersey Business and Industry Association on the TDI and FLI changes on Wednesday, October 30, from 11 a.m. to noon. For more information or to sign up, visit www.njbia.org.
Last summer the first changes took effect, by requiring smaller businesses to participate than before, going from a minimum of 50 employees to 30.
In July, 2020, the amount of job-protected family leave that employees can take doubles from six weeks to 12. The amount of salary replacement during the leave is also going up, from two-thirds of salary to a max of $650 a week, to 85 percent of salary with a max of $860 per week.
It also expanded the reasons that employees can take leave, including to care for foster children and those born by surrogate. “Family” is now a more expansive category as well, covering extended family relatives and even people who are not blood relatives, but who have the “equivalent of a family relationship.” Employees can also now take family leave while preserving their paid time off days, whereas before an employer could make them use those up during their leave period. Employees with part-time jobs will also be able to take FLI from one job while continuing to work at another.
The application process for both programs has been streamlined, making it so that an expecting mother can apply in advance for temporary disability and family leave insurance with one application rather than having to do two.
“The longer benefit period could attract more employees to take more time off,” Foschino says. “You could have more workers out and for longer durations.” Payroll departments also have to adjust: the new rules will require larger amounts of FLI and TDI deductions from every paycheck. The expanded benefits are estimated to cost a significant amount, quadrupling what every employees sees taken out of their paychecks: According to the Department of Labor, maximum deductions will rise from around $58 for TDI and $27 for FLI to $235 and $117 respectively.
The “temporary disability” portion of the program, which covers pregnancy, has been changed to allow employees to collect some income replacement if they are working on a reduced schedule.
Every employer is automatically enrolled in the state FLI and TDI programs. But due to another change, it is now easier to switch to a private insurer. Previously, employers who wanted to use a private insurer instead of the state-run program had to get 51 percent of their employees to sign off on the change. “That’s always been a big hurdle,” Foschino says.
In some ways, the private insurance is similar to the public plan. The law requires that private companies have to offer a plan that pays at least as much as the state plan, and employees can pay no more for it. In other words, it has to be equal to or better than the state plan from the employees’ perspective.
There are several reasons companies switch to a private plan. One is cost: depending on the demographics of the workers, a company might end up paying less than they would to the state. Another is service. “We’re in business to pay claims quickly and provide high levels of customer service, and that hasn’t always been the case with the state,” Foschino says. “A lot of employees complain about the service they get from the state and the amount of time it takes to get paid.”
Could the new laws create a shift in the way family leave is used? It’s possible. Under current laws employees tend not to use all the time that’s available to them by law. “It averages around four weeks,” Foschino says. “It doesn’t usually hit the maxes for an employee. It’s not as utilized as the state would have thought.” It’s possible that one reason for the relative lack of utilization was the low income replacement compensation. The new, more generous policy could encourage more workers to take more time off. “It could become more attractive. We’ll just have to see how it plays out over the next year or so,” Foschino says.