1. Paid Family Leave Presented by: Ed Price, CPA Office of the Auditor-Controller Robert W. Geis, CPA

2. Agenda What is Paid Family Leave (PFL) What is Paid Family Leave (PFL) Claim Details Claim Details County Benefit Integration County Benefit Integration Comparison to State Disability Insurance (SDI) Comparison to State Disability Insurance (SDI) Tax Consequences Tax Consequences Example Example Summary Summary

3. What is Paid Family Leave? Paid Family Leave (PFL) is a state insurance program providing partial wage replacement of up to six weeks for workers who take time off to: Paid Family Leave (PFL) is a state insurance program providing partial wage replacement of up to six weeks for workers who take time off to: –Bond with a new child –Care for a seriously ill family member PFL applies to all employees participating in SDI PFL applies to all employees participating in SDI

4. Key Aspects to PFL Component of SDI Program administered by EDD Component of SDI Program administered by EDD PFL benefits are paid at the same rate as SDI benefits PFL benefits are paid at the same rate as SDI benefits Payments are limited to 6 weeks over 12 month period Payments are limited to 6 weeks over 12 month period There is a one week waiting period before benefits begin There is a one week waiting period before benefits begin

5. Key Aspects to PFL (Cont) Employees cannot receive PFL payments if receiving SDI, Unemployment or Workers Comp benefits Employees cannot receive PFL payments if receiving SDI, Unemployment or Workers Comp benefits PFL does not expand or provide additional leave time nor does it extend or create any additional job protection rights PFL does not expand or provide additional leave time nor does it extend or create any additional job protection rights –PFL is only a right to partial wage replacement when on qualifying leave

6. Time Frames January 1, 2004 January 1, 2004 –Payroll deductions began July 1, 2004 July 1, 2004 –Benefits begin

7. Costs Premiums are paid entirely by employee via payroll deductions Premiums are paid entirely by employee via payroll deductions –SDI rate increased.08% Contribution rate set for two years then to be readjusted based on claim experience Contribution rate set for two years then to be readjusted based on claim experience There is concern that PFL benefits may become so expensive that employers one day may have to contribute There is concern that PFL benefits may become so expensive that employers one day may have to contribute

8. Who Can Receive PFL Benefits? 18 - Prob. Peace Off: Non-Sup 19 - Prob. Peace Off: Supervisor 21 - Human Services, Non-Sup 22 - Human Services, Supervisor 23 - Clerical Serv., Non-Supervisor 24 - Adm, Tec, Of, Hs Non-Sup 25 - Adm, Tec, Of, Hs-Supervisor 26 - Craft, Tec, Mtce Non-Sup 27 - Craft, Tec, Mtce-Supervisor 28 - Engnrs & Techs Non-Super 29 - Engnrs & Techs Supervisor 32 - Confidential Services All 3,700 County employees who participate in SDI are eligible for PFL –Bulk of county employees are eligible –Participation depends on bargaining unit Those units include:

9. Care Claims Includes care for seriously ill spouse, domestic partner, parent, or child Includes care for seriously ill spouse, domestic partner, parent, or child –Does not include Mother/Father-in-laws Requires doctor certification to EDD of serious illness and need for care Requires doctor certification to EDD of serious illness and need for care Requires signature of person (again to EDD) receiving care or his/her authorized representative Requires signature of person (again to EDD) receiving care or his/her authorized representative Must not have other persons available and able to take care of family member Must not have other persons available and able to take care of family member

10. Bonding Claims Requires written proof to EDD of a new child such as birth certificate or adoption papers Requires written proof to EDD of a new child such as birth certificate or adoption papers Includes adopted, foster, or newborn child Includes adopted, foster, or newborn child Must be claimed within 12 months of entry into family Must be claimed within 12 months of entry into family Child must be a minor child under 18 years of age Child must be a minor child under 18 years of age

11. Maternity Leave Dr. determined Pregnancy disability period (pre- birth through postpartum recovery) paid by SDI Dr. determined Pregnancy disability period (pre- birth through postpartum recovery) paid by SDI Can take PFL for Bonding immediately after pregnancy disability ends Can take PFL for Bonding immediately after pregnancy disability ends Avoids another 1 week waiting period if taken immediately after pregnancy disability Avoids another 1 week waiting period if taken immediately after pregnancy disability Fathers also eligible for 6 weeks paid for bonding Fathers also eligible for 6 weeks paid for bonding Only one parent at a time for bonding Only one parent at a time for bonding

12. County Benefit Integration Can use Vacation, Accrued Holiday/Overtime Can use Vacation, Accrued Holiday/Overtime Generally can use up to 1 week Sick time for care of family member Generally can use up to 1 week Sick time for care of family member Can not use Sick time for bonding Can not use Sick time for bonding Target 100% employees normal gross wages Target 100% employees normal gross wages –PFL Benefit Payment + use of leave balances = 100% of employees normal gross wages Use of Leave balances paid through Payroll and included on employees W-2 Use of Leave balances paid through Payroll and included on employees W-2 Current plans to make integration optional Current plans to make integration optional

13. Similarities to SDI Contributions by payroll deductions into State Disability Fund Contributions by payroll deductions into State Disability Fund One Week Waiting Period One Week Waiting Period Weekly benefits range from $50-$728 for 2004 Weekly benefits range from $50-$728 for 2004 Must suffer wage loss Must suffer wage loss Must provide medical certification (for care) Must provide medical certification (for care) Employee may opt to integrate leave balances Employee may opt to integrate leave balances

14. Differences to SDI SDI 52 Weeks per claim 52 Weeks per claim Benefits are for employees own illness, injury, or disability Benefits are for employees own illness, injury, or disability Benefit Payments are not subject to income taxes Benefit Payments are not subject to income taxes Employees must integrate Sick Balances and may opt to integrate other leaves Employees must integrate Sick Balances and may opt to integrate other leaves Integration target 80% - take home pay about the same as before SDI Integration target 80% - take home pay about the same as before SDI PFL 6 weeks in 12 months Benefits are for caring for a seriously ill family member or to bond with a new child Benefit Payments are taxable Employees may integrate leave balances with limits on use of Sick time Integration target 100% - take home pay greater than before PFL

15. Tax Consequences PFL Benefit Payment from EDD will be reported to IRS on 1099G PFL Benefit Payment from EDD will be reported to IRS on 1099G EDD is not withholding any income taxes from the Benefit Payment EDD is not withholding any income taxes from the Benefit Payment Effect… Effect… –Employees tax liability most likely will increase and –Employee may have insufficient withholdings to cover liability when time to file tax returns Need to inform employee of this consequence Need to inform employee of this consequence –Suggest employee assess whether they should increase withholdings

16. Example Net Cash to Employee About the Same Net Cash Significantly More All Because No Tax Withholdings Taken from PFL Pmt

17. Summary Pay for up to 6 weeks Time-off to Bond or Pay for up to 6 weeks Time-off to Bond or to take care of seriously ill family member Same Benefit Amount as SDI but Taxable Same Benefit Amount as SDI but Taxable 100% County Benefit Integration 100% County Benefit Integration Benefits Begin July 1st Benefits Begin July 1st Anticipate many employees to take advantage of this benefit because they are paying for it Anticipate many employees to take advantage of this benefit because they are paying for it