Paid Leave Oregon is a relatively new initiative that guarantees Oregon employees the time and assistance they need to attend to themselves and their loved ones during life’s critical moments. While Paid Leave Oregon is a state-run program, what you might not realize as an employer is that you can opt out of the state-run plan and apply for an equivalent one. And with renewals for equivalent plans coming up in September, now is a great time to explore whether this option might make the most sense for your business.
In this article, we’ll break down what Paid Leave Oregon is, discuss the potential benefits of choosing an equivalent plan, and answer a few other important questions employers should consider when navigating Paid Leave Oregon.
What Is Paid Leave Oregon?
According to their official website, Paid Leave Oregon “provides people who work, own businesses, or run organizations in Oregon easy access to paid leave benefits so they have the support, resources, and peace of mind during life’s important moments.” Types of paid leave that employees are allowed to take include:
- Family leave for the birth of a child, bonding with a child in the first year, or to care for a seriously ill family member
- Medical leave to rest and recover when you experience a serious medical condition
- Safe leave for survivors of sexual assault, domestic violence, harassment, bias crimes, or stalking
How Does Paid Leave Oregon Work?
Generally, both employees and employers contribute to Paid Leave Oregon, with the current contribution rate set at 1% of gross wages up to a certain amount. Of that total, employees pay 60% of the contribution rate, and large employers (25 or more employees on average) pay 40% of the contribution rate. Smaller employers are not required to contribute, but can choose to as an added benefit for their employees.
The Paid Leave Oregon site has more information about contributions and how they’re calculated.
What Is a Paid Leave Oregon Equivalent Plan?
As we stated above, employers have the option to apply for an equivalent plan that is either employer-administered or fully insured and is offered to employees in lieu of the state-run plan. According to Paid Leave Oregon, an equivalent plan must meet the following conditions:
- You must offer the same or more benefits than Paid Leave Oregon offers
- You can’t deduct more from your employees’ paychecks for contributions than Paid Leave Oregon allows
- OED must approve your plan before you can start using it
What Are the Benefits of an Equivalent Plan?
One of the primary benefits an equivalent plan offers employers is potential cost savings. In many cases, the premium when contracting with a private insurer to administer an equivalent plan is lower than the premium set by the state. This is because private insurers have years of experience paying disability claims and extensive knowledge about demographics and other industry indicators deemed relevant by their underwriters. This often puts private insurers in a better position to rate risk — and therefore offer lower premiums — than the state.
In addition to cost savings, private insurers typically have much quicker turnaround times on claims (in many cases within a week), while the state-run plan turnaround is an average of 29 days. Also, when you work with a private insurer, you get a partner with a much deeper understanding of the industry who can better help you navigate the claims process.
Do Employers Need Short-Term Disability for Their Employees Now That Paid Leave Oregon Is in Effect?
In a scenario where an employee has Paid Leave Oregon and short-term disability, the Paid Leave benefit amount will be subtracted from the short-term disability benefit amount (Medical Leave benefits are contractually offset from disability benefits). This will drastically reduce the short-term disability claims an insurer will pay. To help you think about the continued value of short-term disability, we’ve identified the following scenarios in which a short-term disability benefit will still be payable in this new environment:
Scenario 1
You have employees who reside in a state that does not have a paid family medical leave benefit. In this case, short-term disability may still be a valuable benefit. If this is your situation, let us know and we can request an additional short-term disability quote that narrows the eligible class as such.
Scenario 2
You have employees who may exhaust their 12 weeks of Paid Leave benefits (in a 52-week period) who could apply for short-term disability benefits should a recurrent or additional disabling condition occur. In this case, you might consider offering short-term disability on a totally voluntary basis, allowing employees to choose if this is of value to them personally.
Scenario 3
You have employees who make over $130,000 whose Paid Leave benefit will be lower than they would receive under the current short-term disability benefit (which pays them 60% of their earnings). By keeping a short-term disability plan in place, this group of employees would be paid a short-term disability benefit that would keep them at 60% income replacement. So, someone earning $175,000 annually would receive 44% of their income from Paid Leave and an additional 16% from short-term disability. If this is the case, we may be able to request a quote that narrows the eligible class. This is also an instance in which a totally voluntary short-term disability plan might be a good fit, allowing those affected to choose if this is of value to them personally.
Get Expert Help Setting Up Your Equivalent Plan
It’s clear that privately-administered equivalent plans can be a great option for employers. And with the application due date right around the corner, now is the perfect time to evaluate how an equivalent plan could benefit your business and your employees. If you’re ready to set up an equivalent plan and looking for expert guidance during the process, give us a call! We’d love to talk with you, and we’re always here to help answer any questions you might have about Paid Leave Oregon and how you can best streamline your benefits.
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