Massachusetts Releases Updated Guidance On PFML Private Plan Exemption Process And New Bond Coverage Formulae

Seyfarth Synopsis:  As the Massachusetts Paid Family and Medical Leave (“PFML”) law enters the first quarter of PFML contributions, the Department of Paid Family and Medical Leave (“DFML”) has released additional guidance on the next steps for employers that have applied for a private plan exemption. In recent weeks, the DFML also has provided additional information on the bond process for self-insured plans, including changes to the bond coverage formulae and required form.

A Second Phase To The Private Plan Application Process

December 20, 2019 remains the deadline to submit an application for a private plan exemption from remitting contributions for the October 1-December 31 quarter. For employers that apply for an exemption prior to this deadline and are approved, the exemption effective date will be retroactive to October 1, 2019. Retroactive approval is only available for the first quarter of PFML. After December 20, 2019, any exemption application will be considered for an exemption taking effect the following quarter.

To qualify for an exemption from contributions to the Commonwealth’s public PFML program, employers must have either:

• A self-insured PFML plan funded by an employer (which may be administered by a third party administrator), or
• A fully-insured PFML plan offered by an insurance carrier licensed by the Department of Insurance.

Employers applying for an exemption should expect to receive a provisional approval determination. However, the DFML has clarified that it may conduct a deeper, manual review of plan documents and may request additional information before the December 20th deadline to ensure full compliance. The DFML also will be asking provisionally approved applicants to submit, prior to December 20th, proof of either sufficient bonding for the October 1, 2019 – September 30, 2020 period for a self-insured plan or an adequate carrier-issued declaration of insurance for a fully insured plan.

Clarified Requirements For Self-Insured Plans

Employers with self-insured private plans must provide the DFML with a surety bond running to the Commonwealth. The bond form has changed, however. The new form is located here. The employer and bond provider must fully complete and execute the bond form. Employers should include their Federal Employer Identification Number (FEIN) on all bond submissions. The surety bond may be uploaded when an employer applies for an exemption or, if the employer has been provisionally approved for an exemption, the employer will receive correspondence via MassTaxConnect with instructions about how to provide the bond information prior to December 20, 2019.

Of particular note, the DFML has clarified that, for provisionally approved applications, the surety bond must be in place prior to December 20, 2019 for final approval and must have an effective bond term of October 1, 2019 through September 30, 2020.

Each year, employers with private plans must renew their self-insured private plan exemption and furnish a new bond through MassTaxConnect. The Commonwealth may recover PFML contributions from employers that fail to maintain a self-insured PFML private plan prior to January 1, 2021.

New Bond Value Formulae

The DFML also recently released entirely new bond value formulae that differ entirely from the formulae announced earlier this year. To calculate your contribution bond value for the October 1, 2019 – September 30, 2020 period, you will need the following information:

• Your 2018 Average Workforce Count
• The 2018-2019 Statewide Average Weekly Wage: The 2018-2019 Statewide Average Weekly Wage (SAWW) is $1,383.41.
• The 2019 PFML Contribution Rate: Currently, the rates are as follows depending on whether your private plan exemption is for family leave only, medical leave only, or both family and medical leave:
  • Family Leave only is 0.13%
  • Medical Leave only is 0.62%
  • Both Family and Medical Leave is 0.75%

Apply the Following Formula:

2018 Average Workforce Count X 2018-2019 Statewide Average Weekly Wage X Applicable 2019 PFML Contribution Rate X 52 weeks in the bond period

The DFML advises employers to round up to the nearest cent.

Examples of Contribution Bond Coverage Amounts

Number of Covered Individuals	Required Bond Value for Family Leave Plans	Required Bond Value for Medical Leave Plans	Required Bond Value for Family and Medical Leave Plans
20	$1,870.37	$8,920.23	$10,790.60
250	$23,379.63	$111,502.85	$134,882.48

Fully-Insured Private Plan Requirements

Employers seeking an exemption for a fully-insured private plan must submit a Declaration of Insurance by December 20, 2019. The DFML is working with the Massachusetts Division of Insurance (DOI) to develop additional resources and standardized templates so that employers may determine whether a PFML private plan satisfies the exemption requirements. As these resources develop, the DFML will consider a carrier-issued Declaration of Insurance as acceptable proof of family and medical leave coverage consistent with the DFML standards. A list of DOI approved insurance carriers that are able to provide a PFML Declaration of Insurance is available here.

Stay tuned for continued developments, as we expect the DFML to continue releasing updates and guidance regarding the private plan application process and the January 2020 quarterly report requirement.

 For our prior reports on the PFML Law and the regulations, you may refer here.