Demand for Colorado’s paid-family and medical leave 44% less than expected

The work perk of getting paid while taking time off to care for one's health or that of a family member hasn't been as popular as expected, according to the data from the first six months of Colorado's new paid-leave program.

Colorado's Family and Medical Leave Insurance program, which is managed by the state but funded by workers and employers, paid out more than $311 million in benefits in the first half of the year, according to state Department of Labor and Employment data. That's 44% less than the $552.7 million anticipated in a 2022 analysis done for the state, said Tracy Marshall, division director for FAMLI.

"Demand is proving to be lower than projected as Coloradans continue to learn about the program. We're taking this into consideration, as we continue our outreach and education efforts to ensure workers know they now have access to this new benefit," Marshall said in an email.

FAMLI is a social insurance program offering some income to workers on unpaid federal leave. Workers can tap the benefit to bond with a new child, care for themselves or a family member's serious health condition, arrange for a family member's military deployment or address safety issues stemming from domestic violence or sexual assaults.

Though voters approved the program as part of a 2020 ballot initiative, it's still not well known, said Hunter Nelson, Colorado director of Small Business Majority, a progressive organization supporting small businesses.

"Based on our conversations with small business owners in Colorado, it is a mixed bag regarding awareness of FAMLI. Some small business owners are making this clear as an option to their employees but many also haven't even heard of FAMLI," Hunter said. "We feel there is a significant gap in terms of outreach and education of FAMLI to small business owners and their employees who may be eligible for these benefits."

All employers in Colorado must register, including businesses with just one employee. Workers pay 0.45% of their salary into the FAMLI fund, and companies match it. But businesses with fewer than 10 employees aren't required to contribute the company portion — a carveout Small Business Majority advocated for, Hunter said. Companies with private plans must get state approval before opting out.

As of July 1, the FAMLI fund had $1.1 billion, according to state officials. That includes worker and employer contributions for the first quarter, but not the second quarter, which are still rolling in. The current fund also doesn't include the $311 million, since those have already been paid.

"Our fund is strong and at no risk of running out of money," Marshall said.

Who opted out of FAMLI

There are 1,321 local governments that voted to opt out of the plan, which is about an 86% decline rate. Many in this group — which includes any city, town, school or special district — said they already had a plan or the cost of FAMLI was too high.

Another 5,155 employers are on one of the 20 private plans approved by the state. That's about 2.4% of employers.

Many said they have similar or better programs in place for their workers. The deadline to opt out is March 31.Employees of local governments that opted out and the self-employed can still participate in FAMLI by paying the premiums. Federal workers aren't eligible.

The loss of local governments and companies with private plans could "pose some risk to the solvency of the program," according to the Segal Group, which analyzed the cost and solvency of FAMLI in 2022. Segal Group anticipated that the fund would remain solvent even if 75% for local governments and 25% for private employers opted out.

However, the report noted that even with 100% of local governments opting out, the program would remain solvent through fiscal year 2032. And at a rate of 2.4% on private plans, that means the vast majority of private employers are participating.

It's the private employers that could be worrisome.

"Right now, we have no concerns about how local government participation or employers using private plans will impact future solvency. The first six months of the program are showing a surplus in funds," Marshall said.

The stats of FAMLI

As it is, there are now 219,222 private employers registered with FAMLI and roughly 3.2 million workers who are eligible.

As of July 1, 62,632 claims were approved. Approximately 3,488 were denied, while about 13,100 were incomplete or canceled by the worker. Of those approved for leave, 70% have already returned to work.

The benefit provides a weekly paycheck that is up to 90% of a worker's earnings for up to 12 weeks, or 16 weeks if there are childbirth complications. Benefits are capped at $1,100 per week, so higher earners will see a smaller paycheck, which workers can choose to top off using their vacation and sick days, if available.

When the employee wants to take paid leave, they must file a claim with the state agency, which manages the process and pays the benefit. The employer isn't responsible for paying employees during their leave but must pay health insurance premiums that are normally covered. Workers on leave must arrange to pay their share of health insurance in order to keep it.

In the first half of the year, the average leave was 53.3 days and the average weekly payment was $915.30, according to state data.

As seen in the chart below, there were more workers requesting medical leave to care for themselves than the traditional reason for parental leave of taking care of a new child.

"Based on what we're seeing in the first six months of the program, we're focusing now on making sure Colorado workers know they have access to this new benefit — something many workers may not have typically had access to previously," Marshall said, sharing additional tools and resources that could help workers through the application process.