Legislative update: How the election results and new paid leave laws will affect employee benefits. November 7, 2018

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1 Legislative update: How the election results and new paid leave laws will affect employee benefits November 7, 2018

2 Onto James Slotnick, JD AVP, government relations Sun Life Financial

3 Agenda Yesterday s results Issues to watch 727 days to go 3

4 Results from Presidents first midterm Year President Approval rating Senate House 1982 Ronald Reagan 43% George Bush 58% William J. Clinton 46% George W. Bush 63% Barack Obama 45% Donald J. Trump 43.6% Likely +4 At Least -27 4

5 Results from Presidents first midterm Year President Approval rating Senate House 1982 Ronald Reagan 43% George Bush 58% William J. Clinton 46% George W. Bush 63% Barack Obama 45% Donald J. Trump 43.6% Likely +4 At Least -27 5

6 Results from Presidents first midterm Year President Approval rating Senate House 1982 Ronald Reagan 43% George Bush 58% William J. Clinton 46% George W. Bush 63% Barack Obama 45% Donald J. Trump 43.6% Likely +4 At Least -27 6

7 Results from Presidents first midterm Year President Approval rating Senate House 1982 Ronald Reagan 43% George Bush 58% William J. Clinton 46% George W. Bush 63% Barack Obama 45% Donald J. Trump 43.6% Likely +4 At Least -27 7

8 Results from Presidents first midterm Year President Approval rating Senate House 1982 Ronald Reagan 43% George Bush 58% William J. Clinton 46% George W. Bush 63% Barack Obama 45% Donald J. Trump 43.6% Likely +4 At Least -27 8

9 Results from Presidents first midterm Year President Approval rating Senate House 1982 Ronald Reagan 43% George Bush 58% William J. Clinton 46% George W. Bush 63% Barack Obama 45% Donald J. Trump 43.6% Likely +4 At Least -27 9

10 Results from Presidents first midterm Year President Approval rating Senate House Governors 1982 Ronald Reagan 43% George Bush 58% William J. Clinton George W. Bush 46% % Barack Obama 45% Donald J. Trump 43.6% Likely +4 At Least

11 Agenda Yesterday s results Issues to watch 727 days to go 11

12 2018 is not over yet Lame Duck session, November 13 December 14 Government funding Expires December 7 Retirement legislation Family Savings Act of 2018 (H.R.6757) Retirement Enhancements and Savings Act of 2018 (S.2526) Both would broaden rules for creating Multiple Employer Pension Plans, removing common interest requirements Judicial appointments Through October 11 of first term, last four presidents averaged: 16 appeals court confirmations President Trump: 26 appeals court confirmations USMCA 12

Legislation likely to slow in 2019 By maintaining control of the Senate, Republicans: Can continue to confirm judges and political appointees Cannot pass legislation without Democrat

13 Legislation likely to slow in 2019 By maintaining control of the Senate, Republicans: Can continue to confirm judges and political appointees Cannot pass legislation without Democrat support (60 votes required) By gaining control of the House, Democrats: Can pass legislation in the House without any Republican support Chair key committees, including Ways and Means 13

14 More healthcare changes ahead? Repeal and Replace No viable path forward Texas v. United States Texas: Entire ACA unconstitutional with a $0 individual mandate U.S.: Underwriting prohibitions cannot continue with a $0 individual mandate but remainder of law can stand (no employer mandate relief) California (through motion to intervene): Entire ACA must stand Will Democratic 2020 platform include single payer? Medicare For All Act of (2017) introduced by Senator Sanders Co-sponsors include Senators Booker, Harris, Gillibrand, and Warren 14

Other issues to watch Disability plan enrollments Department of Labor likely to issue guidance affirming the ability of plans to auto-enroll employees into disability plans Paid Family & Medical

15 Other issues to watch Disability plan enrollments Department of Labor likely to issue guidance affirming the ability of plans to auto-enroll employees into disability plans Paid Family & Medical Leave More discussion on the federal level, action on the state level Legislation regarding Balance Billing Bipartisan group of senators discussing legislation that would limit patients exposure, put more liability on plans 15

16 Agenda Yesterday s results Issues to watch 727 days to go 16

17 2020 Senate races Democrat Incumbent Republican Incumbent WA OR ID MT WY ND SD MN WI MI NY ME States to watch: Alabama Colorado Iowa Maine CA NV UT CO NE KS IA MO IL OH IN KY WV PA VA AZ NM OK AR TN NC SC MS AL GA AK TX LA FL 17

18 2020 dates to remember February 3: Iowa caucuses February 11: New Hampshire primaries February 15: Nevada Democratic caucus February 22: South Carolina Democratic caucus March 3: Super Tuesday 18

19 Summary The results are in Number of issues to watch 2020 elections begin today 19

20 The rapid growth of statutory paid leave laws Paid Sick Leave Statutory Disability Paid Family Leave Paid Family & Medical Leave (PFML) Marjory Robertson, JD AVP and senior counsel Sun Life Financial

21 Agenda Statutory Paid Leave on the rise Paid sick leave laws and who has them The evolution of Paid Family & Medical Leave What does the future hold? 21

Statutory Paid Leave is on the rise! In the U.S., federal, state and local legislatures are adopting Statutory Paid Leaves at a breathtaking pace These

22 Statutory Paid Leave is on the rise! In the U.S., federal, state and local legislatures are adopting Statutory Paid Leaves at a breathtaking pace These laws could affect the structure of employee benefits, including but not limited to: PTO policies, and Short- and Long-Term Disability Insurance programs 22

23 Paid maternal leave almost everywhere The United States is one of only eight countries, out of 188 that have known policies, without leave. 2013, February. Children s Chances: How Countries Can Move From Surviving to Thrive by Jody Heymann with Kristen McNeill. The New York Times. 23

24 Paid leave entitlements to care for an ill family member in OECD countries 2018, September issue: AEI-Brookings Working Group Report on Paid Family and Medical Leave Charting a Path Forward. Figure 7, page

Sweden: Mandatory parental leave for dads Sweden s parental leave policies are among most generous in world 480 days (390 days paid at 80% of salary) Taxpayer funded

25 Sweden: Mandatory parental leave for dads Sweden s parental leave policies are among most generous in world 480 days (390 days paid at 80% of salary) Taxpayer funded Couples are required to split parental leave 3 months are allocated to each parent use it or lose it Government report has recommended that dads take 5 months of leave 25

26 Paid sick leave (PSL) laws: Who has them? States Cities Counties/Districts/ Territories Arizona California Connecticut Maryland Massachusetts New Jersey* Oregon Rhode Island Vermont Washington Variations:** Georgia Illinois Maine Michigan???*** California: Berkeley, Emeryville, Long Beach, Los Angeles, Oakland, San Diego, San Francisco, Santa Monica Illinois: Chicago Minnesota: Duluth, St. Paul, Minneapolis New York: New York City Pennsylvania: Philadelphia Texas: Austin, San Antonio**** Washington: Seattle, Spokane, Tacoma District of Columbia Puerto Rico Montgomery County (MD) Cook County (IL) (employers can opt out) Westchester County (NY) (adopted 10/2/18 eff. April 2019) U.S. Government Federal Contractors must provide paid sick leave *The New Jersey law provides that the state law preempts all local paid sick leave laws. Therefore, effective 10/29/18 paid sick leave laws in the following cities will be preempted: Bloomfield, East Orange, Elizabeth, Irvington, Jersey City, Montclair, Morristown, Newark, New Brunswick, Passaic, Paterson, Plainfield, Trenton. **Georgia, Illinois and Maine require certain employers who offer PSL to allow it to be used for broader purposes. ***In 09/18, the Michigan (Republican controlled) legislature passed a paid sick leave law it appears to be a legislative maneuver to keep a paid sick leave ballot initiative off the ballot. ****The Austin PSL law has been enjoined by court order. 26

27 What are paid sick leave laws? Employers must provide paid sick leave (PSL) for the following reasons: Employee s own illness To care for covered family member who is ill (broader than FMLA) Siblings; grandparents; in-laws; anyone who is like family To attend routine medical appointments for employee or family member Sometimes, other reasons such as domestic violence Employers must fund PSL out of payroll at full pay Leave is job protected and no retaliation Many PSL laws forbid requesting doctors notes until more than three consecutive days of absence Leave is permitted on an intermittent basis 27

The PTO does not have to be just for sick time can be general PTO.

28 Common sense compliance with paid sick leave laws All of the paid sick leave laws have a common provision: If the employer provides PTO that is at least as generous as what law requires, employer will be deemed in compliance. The PTO does not have to be just for sick time can be general PTO. Employers should review their PTO policy and make sure that they are at least as generous as what law requires. Employers can include provision saying: If you live or work in a state or city that has a more generous legal requirement, we will comply with that requirement. 28

29 Let us help you! 29

30 Paid Family & Medical Leave (PFML) laws: current and proposed States Federal Proposed legislation California Delaware (state employees only/parental leave only eff. 9/1/19) Hawaii (disability only)* Massachusetts (premiums collected 7/1/19 and most leaves eff. 1/1/21) New Jersey New York Rhode Island Washington (premiums collected 1/1/19 and leaves eff. 1/1/20) *On 7/5/18, Hawaii Gov. Ige signed law requiring legislature to propose PFL legislation by 9/1/19. Federal tax credit for PFML U.S. Congress Cities/Districts/Territories San Francisco (parental leave only) District of Columbia (premiums collected 7/1/19 and leaves effective 1/1/20) Puerto Rico (disability only) Family Act (Gillibrand) Econ. Security for New Parents Act (Rubio) States Colorado Connecticut Georgia Illinois Maine (passed legislature/governor vetoed) Minnesota Nebraska New Hampshire Oregon Vermont (passed legislature/governor vetoed)... and more! 30

31 Evolution of PFML legislation: phase 1 State Stat. Disability Insurance date Job protection? Stat. Paid Family Leave date Job protection? RI 1942 No 2014 No CA 1946 No 2004 No NJ 1948 No 2009 No NY 1949 No 2018 YES HI 1969 No In development 31

Evolution of PFML laws Phase 2: merge job protection and income replacement Washington (State) PFML (leaves begin 1/1/20) 12 weeks of paid leave for employee s own serious health

and paid family leave Extra 2 weeks paid leave if absence relates to pregnancy Massachusetts PFML (leaves begin 1/1/21) 20 weeks of paid leave for employee s own serious health condition

32 Evolution of PFML laws Phase 2: merge job protection and income replacement Washington (State) PFML (leaves begin 1/1/20) 12 weeks of paid leave for employee s own serious health condition 12 weeks of paid family leave Bond with new child Care for family member with serious health condition Qualifying military exigency Combined total of 16 weeks of paid medical and paid family leave Extra 2 weeks paid leave if absence relates to pregnancy Massachusetts PFML (leaves begin 1/1/21) 20 weeks of paid leave for employee s own serious health condition 12 weeks of paid family leave Bond with new child Care for family member with serious health condition Qualifying military exigency Combined total of 26 weeks of paid medical and paid family leave 32

33 State PFML benefit amounts vary State Amount of benefit Max benefit CA 60% 70% wages, depending on income $1,216/week MA 80% wages, up to SWAWW, and 50% thereafter $850/week NJ 66% wages $637/week NY Medical: 50% wages. Family: 50% 66% (increasing annually from ) Medical: $170/week PFL: $ (2018), $ (2019) RI 60% wages $852/week WA 90% of wages, up to 50% of the SWAWW, and 50% thereafter Min. benefit $100/week (unless actual wages less than $100/week then actual wages) $1,000/week 33

34 Variable factors in PFML laws include: Reasons for leave Length of leave Amount of benefit Family members covered Intermittent leave (and minimum increment) Triggers for eligibility Triggers for job protection Portability Required continuation of healthcare and other benefits 34

35 Paid sick leave vs. PFML Category Paid sick leave laws Paid medical leave laws (stat. disability) What is it? Paid time off: For employee s own illness To care for ill family member To attend routine medical appointments for employee or family member Benefits when employee is out of work due to employee s own health condition Paid family leave laws Benefits when employee is out of work: To bond with new child Care for ill family member Military Exigency Caps: Combined medical and family leaves annually Length of leave/benefit Days: Varies by jurisdiction: from 3 to 8 days (or 24 to 56 hours) Weeks: CA: 52 weeks HI, NJ, NY: 26 weeks RI: 30 weeks WA: 12 or 14 weeks if pregnancy MA: 20 weeks Weeks: CA, NJ: 6 weeks RI: 4 weeks NY: 8 weeks 2018 increasing to 12 weeks 2021 WA: 12 weeks MA: 12 weeks CA: 52 weeks HI: N/A MA, NJ, NY: 26 weeks WA: 16 weeks (or 18 weeks if pregnancy) Amount of benefit? Full pay Partial pay/subject to income cap Partial pay/subject to income cap How typically funded? Employer payroll Employee payroll deductions government, insurer, and/or self-insure Employee payroll deductions government, insurer and/or self-insure Job protection? Yes NJ, CA, NY, RI: No WA: Yes, sometimes NY, RI: Yes CA, NJ: No MA: Yes WA: Yes, sometimes 35

36 Current state of federal PFML Feature Existing: H.R. 1 PFML benefit (sunsets 12/31/19 Senate bill filed to make permanent) Proposed: FAMILY ACT 31 Senate co-sponsors/154 House co-sponsors Proposed: Economic Security For New Parents Type of leave Any one of the FMLA covered leaves FMLA covered leaves Maternity and paternity leaves Mandatory program? No. Optional program. Employers can qualify for tax credits. Yes. Federal government-run program for all employees. No. Individuals eligible for Social Security benefits (SS) could take advance on SS, resulting in delay of SS retiree benefits. Premium costs Employer creates program (not clear whether must be fully employer paid). Employer and employee each pay 0.2% payroll tax (up to OASDI limit) into Paid Family Leave Trust Fund. No additional premium costs, funded through current SS program. Amount/Length of benefit Employer receives tax credit if program provides employees who make <$72,500 paid at the rate of at least 50% of earnings. Employer tax credit eligible for between 2 and 12 weeks of leave. Income replacement of 66% with a minimum monthly benefit of $580 and a maximum monthly benefit of $4,000. Eligible for up to 12 weeks of leave. Income replacement would use a SS formula that would replace approximately 45% of monthly earnings, max. monthly benefit $2,788, with assumed average benefit of $1,175. Eligible for up to 12 weeks of leave. Pre-emption of state laws? No. To be eligible for tax credit, leave must be in addition to that required by state or local law. No No Opportunity for insurer involvement Yes, insurer could provide and administer PFML program for employer. No, employers would not have ability to opt out of the government plan. No 36

37 What about the proposed Workflex Act? The Workflex Act is not likely to satisfy advocates who want Paid Family & Medical Leave: It is voluntary not mandatory It only requires employers to offer between 12 and 20 paid days off per year (ranges based on size of employer and length of employment) Employer can include up to six paid holidays in counting toward the limit. Therefore, Workflex really only requires between 6 and 14 paid days off. Contrast with Senator Gillibrand s Family Act: 12 weeks paid leave. Employers like it because it preempts comparable state and local laws Would preempt paid sick leave laws. But: Not clear that preemption would cover PFML laws because less generous Workflex benefits may not be deemed comparable to PFML benefits. 37

38 More and more employers are offering Voluntary Paid Parental and/or Paid Family Leave U.S. is (almost) the only OECD country that does not provide paid parental leave benefits Political support for Paid Family Leave Benefits to employers? Talent attraction Employee retention Improved employee engagement, morale, and productivity Enhanced brand Demographics of millennials: Millennials are having children and caring for aging baby boomer parents Employer options? Paid parental leave to bond with new child (born, adopted, foster) Paid leave to care for an ill family member Beware of maternity leave policies available only to women: gender discrimination Primary caregiver or birth mother 38

weeks of PFML at two-thirds wages, or up to $1,000 weekly http://www.nationalpartnership.

39 More and more employers are voluntarily sponsoring paid leave programs 8/30/18: Microsoft announces it will only contract with companies that offer to their employees at least 12 weeks of PFML at two-thirds wages, or up to $1,000 weekly paid-leave/new-and-expanded-employer-paid-family-leave-policies.pdf 39

40 Let us help you! 40

The impact of PFML on employee benefits Statutory PFML laws may affect short-term disability (STD) benefits because statutory PFML benefits are reasonably generous for employees earning up to approx.

41 The impact of PFML on employee benefits Statutory PFML laws may affect short-term disability (STD) benefits because statutory PFML benefits are reasonably generous for employees earning up to approx. $70,000 annually Not apples to apples PFML laws do not satisfy needs of higher income employees because of caps on benefits ($1,000 WA and $850 MA) PFML Laws have combined maximum annual allotments of PML & PFL Example: (WA PFML = 16/18 weeks) (MA PFML = 26 weeks) If an employee takes 12 weeks of PFL: 4 or 6 weeks of PML in WA 12 weeks PML in MA PFML can be taken in intermittent basis not STD And PML is available if an employee is not able to work because of a serious health condition while STD requires disabling medical condition 41

42 State PFML laws: voluntary plan solutions Some states permit employers to opt out of state program if they provide same benefits through voluntary or private plan Must have at least same benefits as state program (including job protection) and cannot charge employees more than what is authorized under state program States that permit a voluntary plan option: California Hawaii New Jersey New York Massachusetts Washington Jurisdictions that do not permit voluntary plans: Rhode Island District of Columbia 42

43 Is a voluntary plan opt-out right for you? Insurers have extensive leave management experience Insurers currently provide absence management services to employers, ensuring compliance with unpaid federal, municipal and state leave laws Insurers may better manage abuse of leave than the state does Insurers have state PFML experience Built compliant NY PFML programs and private insurers currently administer approx. 90% of all New York s PFML policies Insurers are building compliant PFML policies for MA and WA Claims expertise and staffing Extensive actuarial, IT, claims and customer service staffing investments that are devoted to operating a complex process for adjudicating claims for leave benefits Insurers may better adjudicate whether or not an employee has proven eligiblity Short-term disability claim management experience Average short-term disability claim by a private insurer is processed in 13 business days 43

Benefits of insurer-provided voluntary PFML plans Insurer involvement benefits government agencies by shouldering the work, lowering the costs and providing expertise.

44 Benefits of insurer-provided voluntary PFML plans Insurer involvement benefits government agencies by shouldering the work, lowering the costs and providing expertise. Insurer involvement benefits employers by giving them competitive options: Resulting in more competitive pricing Seamless integration with STD/LTD and outsourced leave/ada management More client service orientation than state programs Insurer involvement benefits employees by providing a higherquality claims administration experience. 44

45 What does the future hold? 45

46 2018 midterms: States to watch for PFML State House control Senate control Governor Oregon Dem. Dem. Dem. Kate Brown Yes Maine Dem. Dem. Dem. Janet Mills Yes Colorado Dem. Dem. Dem. Jared Polis Yes Connecticut Dem. Dem. Dem. Ned Lamont (too close to call) No Illinois Dem. Dem. Dem. J.B. Pritzker Yes New Mexico Dem. Dem. Dem. Michelle Grisham No Vermont Dem. Dem. Rep. Phil Scott No New Hampshire Dem. Dem. Rep. Chris Sununu No Minnesota Dem. Rep. Dem. Tim Walz No Allow ballot initiatives? 46

47 What else does the future hold? Australia: Proposed paid leave for women s menstrual cycles New York: Legislature passed law requiring up to 12 weeks paid leave for bereavement Colorado: Legislature passed giving tax credit to employers who offer up to 10 days paid leave for living organ donors Global? Some employers offering paid Pawternity leave and paid pet bereavement leave (US, Australia, Italy) 74

Follow us on LinkedIn: James Slotnick, JD Marjory Robertson, JD One Sun Life Executive Park Wellesley Hills, MA 02481 www.sunlife.

48 Follow us on LinkedIn: James Slotnick, JD Marjory Robertson, JD One Sun Life Executive Park Wellesley Hills, MA Sun Life Assurance Company of Canada, Wellesley Hills, MA All rights reserved. Sun Life Financial and the globe symbol are registered trademarks of Sun Life Assurance Company of Canada. Visit us at GGPPT-8081o SLB /18 (exp. 12/20)

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