Voluntary PFML: Employer Takeaways and Best Practices

An increasing number of mandated paid family and medical leave (PFML) programs have been passed in the last several years. Employers are now familiar with these requirements, which mandate offering PFML to all employees in a specific state. However, a new trend has emerged in 2022 and expanded in 2023, introducing voluntary PFML programs. A brief history provides context and guidance as states and employers explore PFML options.

The voluntary PFML trend begins

In early 2019, the governors of Vermont and New Hampshire proposed the Twin State Voluntary Leave Plan, which aimed to mandate PFML for state employees in both states while allowing businesses and individuals to opt into the program. The plan sought an insurance carrier to assume the risk and provide claims administration. Although the Twin State proposal did not materialize, New Hampshire moved forward with the Granite State Paid Family Leave Plan. This became the first voluntary PFML plan, requiring coverage for state workers and offering enrollment to other employers and individuals through an insurance carrier.

Virginia takes a different approach

In April 2022, Virginia passed legislation that established private paid family leave as a class of insurance. Unlike other states, Virginia did not mandate PFML coverage for employees. Instead, it allowed insurance carriers to develop and sell paid family leave insurance products, subject to state approval. The legislation set basic standards for coverage, such as reasons for leave and duration, but left the program structure to be defined by insurers.

Vermont adopts the New Hampshire model

In December 2022, Vermont selected The Hartford to create the state-mandated Vermont Family and Medical Leave Program. The program initially covered state employees, providing 60% of their average weekly wage for up to six weeks per year. Coverage is gradually expanding to other employers and individuals in the state, with all Vermont employers having the option to enroll in coverage provided by The Hartford starting July 1, 2024. Individuals not covered by the state's voluntary option could elect coverage through the program starting July 1, 2025.

Five states follow Virginia's lead

In 2023, several states that had considered a PFML mandate, opted for an insurance-based approach like Virginia's. Arkansas, Tennessee, Alabama, Florida, and Texas passed legislation allowing family leave insurance as an option. These states amended their insurance codes to define the type of leave covered by paid family leave insurance.

Fundamental takeaways for employers

There are two versions of voluntary PFML: 

• New Hampshire and Vermont mandate PFML for state employees, while other employers in the state can opt into an established program. 

• In the five states that followed Virginia's lead, insurers can develop family leave insurance products and receive state approval to sell them. This approach allows insurers to design offerings for employers to select, similar to traditional private disability offerings.

Employer options in a developing marketplace

Currently, only one insurance carrier has received approval in Virginia for fully insured paid family leave, other carriers may soon follow suit. However, the marketplace for this insurance is not yet robust. Employers that provide company leave for reasons like bonding, care of a family member, or military exigency may not have much motivation to explore this voluntary market. 

As the marketplace develops and employers seek this type of insurance, employers should ask their carriers if they plan to offer these benefits. Since it takes time for carriers to develop a new solution and get required regulatory approvals, there may be limited insurance options for several years to come. 

The information about paid leaves for employees is being provided for informational purposes only and does not constitute legal advice or a legal opinion on any specific facts or circumstances. Please refer to each state’s website for more information. The information is for general informational purposes only, and you are urged to consultant a lawyer concerning your own situation any specific legal questions you may have. New York Life Group Benefits Solutions assumes no responsibility for any circumstances arising out of the use, misuse, interpretation or application or any information supplied in this publication.