At the end of 2021, Oregon passed House Bill 3398 (HB 3398), which laid out the timeframe for the implementation of the state’s Paid Family and Medical Leave Insurance (PFMLI) program. While staying on track with this timeline, the Oregon Employment Department (OED) recently declared the contribution rate for employers and employees, that are set to begin being deducted as of January 1, 2023.
Covered Employers
All employers, except federal and tribal governments, are required to participate in the PFMLI leave program. Tribal governments can choose to provide coverage through the program.
Covered Employees
Contributions are required for employees who primarily work in Oregon, even if employees live in another state or occasionally work in another state. Oregon residents who work entirely in another state do not pay contributions.
PFMLI Contribution Rate
According to the OED, employers and employees will be responsible for a 1% contribution up to $132,900 in wages for the costs associated with providing PFMLI benefits through the state-run program. The state has determined that said 1% will be provided through a 60/40 split between both parties. Employees will be responsible for contributing 60% and the employer will be responsible for the remaining 40%. Alternatively, employers have the option of covering the employee portion of the PFMLI contribution.
- Example: For an employee who earned $1,000 for the week, a $10 contribution would be owed to the state in order to cover the 1% contribution rate. Taking into account how the 1% is split between the employee and employer, the employee would be responsible for contributing $6 and the employer would need to provide the remaining $4.
Once contributions begin, employers will be expected to deduct the applicable share of the 1% contribution rate via a payroll tax and ensure this information is properly included on the employee’s wage statements. Employers will then report wages and pay both the employee and employer contributions through the combined payroll reporting process.
The funds will be managed by the state through a state trust fund to prepare distribution of PFMLI benefits that are set to begin as of September 3, 2023.
Contribution Exceptions
Employers with less than 25 employees are not required to contribute an employer portion to the 1% contribution rate. However, small employers who decide to provide the employer portion of the contribution may be eligible for assistance grants to help cover the cost associated with the contributions. Grants received could cover up to $3,000 per employee, up to a maximum of 10 employees per year. Small employers who take advantage of the grant funding should note there is a condition for receiving grant funding, and in doing so, they will be responsible for committing to making the employer contribution for the next two years. Additional information for employers regarding this program from the OED, can be found here.
Additional Information
According to HB 3398, the state’s trust must contain enough funds to cover the cost of the benefits for up to six months. In order to ensure that the fund is maintained, it is expected that the OED Director will continue to use actuarial data and forecasting to evaluate the PFMLI contribution rate on an annual basis. In doing so, the OED calculates that the 1% contribution rate will provide enough funds to meet “the legal requirement and pay benefits for Oregon workers.” However, the OED anticipates that the contribution rates should decrease as time goes on while the funds in the trust continue to flourish.
Next Steps for Employers
Even though employees cannot begin collecting PFMLI benefits until September 2023, employers need to be mindful of the January 1, 2023, compliance date to ensure that payroll deductions for PFMLI are made and the employer portions are reported and remitted to the state. Employers who utilize the services of a payroll provider should work with their payroll provider to ensure compliance.
It is also expected that prior to the contribution implementation date, the OED will provide additional resources to employers to assist with ensuring compliance.
