The Baker Administration today extended by almost three months the deadline for employers to secure private insurance that would allow them to opt out of the Massachusetts paid family and medical leave system.

The administration also extended the deadline for employers to inform workers about opt-out plans from May 31 to the end of June.

Both changes are intended to address a looming problem that could have forced employers to decide whether or not to opt-out at a time when insurance companies have yet to offer private alternatives.

Associated Industries of Massachusetts, which has conducted extensive conversations with the administration on the issue, plans to survey its member employers to determine whether the extension provides enough time to make a responsible decision about their companies’ approach to paid leave.

The paid-leave law passed by the Legislature and signed by Governor Charlie Baker last year allowed companies to bypass the state PFML system if they maintain disability or other insurance policies that provide benefits equal to, or better than, the state program. But companies face a Catch-22 because private insurance companies, citing uncertainty about key elements of the paid-leave regulations, have yet to introduce policies that would qualify as alternatives.

Starting paid leave with no option for companies seeking a private alternative would have contravened the spirit of the 2018 paid-leave law and generated a storm of opposition from the business community.

“The original deadline did not provide enough time for insurance companies to develop effective alternatives to the state paid leave program for employers who want them,” said John Regan, Executive Vice President of Government Affairs at AIM.

“Employers who have for years voluntarily provided some form of paid leave should be able to continue those benefits in the private market.”

The administration plan would give employers until September 20 to file for a private-plan exemption from the state paid-leave system. Employers would need to show proof of insurance by September 20 to remain out of the public system. If the request for exemption is disapproved, employers must then make their first-quarter payment on Oct 1.

Employers are also in the process of deciding how to split the cost of the new program with employees.

Meanwhile, there is also uncertainty surrounding the issue of whether employee deductions will be made pre-tax or post-tax and whether the federal government will tax paid family and medical leave benefits when they become available in January 2021.

The Massachusetts Department of Family and Medical Leave today sent guidance to employers about the impending paid-leave deadlines and the tax issue.

The paid family and medical leave law provides workers with 12 weeks of family leave and 20 weeks of personal medical leave. Workers on paid leave will earn 80 percent of their wages up to 50 percent of the state average weekly wage, then 50 percent of wages above that amount, up to an $850 cap.

Companies and workers are scheduled to begin paying into a paid leave trust fund on July 1. The initial payroll tax is 0.63 percent and will be adjusted annually.  The payroll tax is divided between medical (0.52 percent) and family (0.11 percent) leave.

The employer is required to pay at least 60 percent of the medical leave contribution required for each employee. The employer is required to pay none of the contribution for family leave. Employers may, of course, pay a higher percentage for each category of leave or elect to pay the entire contribution for each employee.

Companies employing an average of fewer than 25 employees in Massachusetts will not be required to pay the employer portion of premiums for either family or medical leave.

An individual’s paid family or medical leave weekly benefit amount is calculated as follows: (a) The portion of an individual’s average weekly wage that is equal to, or less than, 50 percent of the state average weekly wage is replaced at a rate of 80 percent; the portion of an individual’s average weekly wage that is more than 50 percent of the state average weekly wage is replaced at a rate of 50 per cent.

The initial maximum weekly benefit amount is $850.

The law requires that companies seeking to opt out must have private insurance that offers:

• Same number of job-protected weeks of leave
• Equivalent wage replacement
• Employee contributions no more than required by law

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