New Year Brings FMLA Payroll Tax, Other Changes

Connecticut employers must begin withholding 0.5% of employee wages to fund the state’s paid family and medical leave mandate beginning Jan. 1, 2021.

That’s one of a number of new state laws that take effect on the first day of the new year.

The paid FMLA mandate introduces additional administrative challenges for most employers—and a new tax for every private sector employee in Connecticut.

“Smaller employers who never had to worry about FMLA now will,” CBIA HR counsel Mark Soycher said recently.

Andrea Barton Reeves, CEO of the state’s Paid Family and Medical Leave Insurance Authority, says employers are responsible for collecting the payroll tax and remitting the funds quarterly to the authority.

“Businesses are strongly encouraged to begin withholding as early in January as possible,” she told the Connecticut Mirror.

“Falling behind in withholdings could result in employers being responsible for making contributions themselves, as employment laws limit taking additional money from employee paychecks to make up for missed contributions.” 

Benefits

Employers also must register with the authority and create an account. (Note that the Internet Explorer browser is incompatible with the authority’s online registration system.)

Unionized public sector employees are not subject to the tax.

The mandate provides up to 12 weeks of paid leave for employees to care for themselves, or an extended family member.

Employees can begin taking paid family and medical leave from Jan. 1, 2022, with benefits at up to 95% of pay.

Employees can begin taking the paid family and medical leave from Jan. 1, 2022, with benefits at up to 95% of pay, capped at 60 times the minimum wage—$900 per week when it reaches $15 per hour in 2023.

Lawmakers approved the mandate in 2019 for businesses with as few as one employee.

Pension, Annuity Income

Another law set to go on the books Jan. 1 doubles the amount certain retirees can claim from pension and annuity income received in 2020 as a deduction on their Connecticut gross adjusted income.

Individuals earning less than $75,000 annually and couples earning less than $100,000 will be able to claim 28% of pension and annuity income as a deduction, twice the 14% the state allowed them to deduct in 2019.

Another law set to go on the books doubles the amount certain retirees can claim from pension and annuity income.

The deduction increases to 42% in 2022 on its way to 100% by 2025.

Another new law impacts the state’s electric utilities, requiring them by Jan. 1 of each year to submit a report to the state showing preparation plans for weather incidents like hurricanes and snowstorms, as well as other emergencies.

The Public Utilities Regulatory Authority will use the report to set standards for minimum staffing for utilities during storms and restoration.

Insurance Changes

Another new law makes various changes to insurance statutes.

These changes include allowing the insurance commissioner to engage the services of insurance professionals to review certain form and rate filings, opting Connecticut into the Interstate Insurance Product Regulation Compact for disability income products, and allowing certain insurance documents to be sent electronically with the insured’s consent.

The law also amends the information that companies administering certain 403(b) retirement plans for political subdivisions of the state must disclose to participants, and requires the companies to provide the same information to the state comptroller electronically.