Impact of Maryland's Paid FAMLi Program

In 2022, the Maryland General Assembly passed the Family and Medical Leave Insurance Program (FAMLi), otherwise known as the Time to Care Act. This new program allows eligible employees to be entitled to receive up to 12 weeks of paid family and medical leave per benefit year.

Maryland is now the 11th state to offer this program, joining the District of Columbia as well as California, Colorado, Connecticut, Delaware, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Washington.

Many details are still to be determined, as the Maryland Department of Labor began the regulatory drafting process and stakeholder involvement this month. The department is required to issue regulations implementing the program by January 1, 2024.

Depending on your perspective, this may sound like a wonderful option especially if your employer did not previously grant paid time off. Or it may feel like another mandatory tax by the state. Whatever your perspective, here's what we currently know about this new program.

What Can the FAMLi Program be Used For?

* To care for a child during the first year after the child's birth or before or during the first year after the placement of the child through foster care, kinship care or adoption

* To care for a family member with a serious health condition

* The employee's own serious health condition that results in their being unable to perform the functions of their position

* To care for a service member who is the employee's next of kin

* For a qualifying exigency arising out of the deployment of a service member who is a family member of the employee

Who Pays for FAMLi Program?

Beginning October 1, 2024, employers and employees will have their portion of the cost deducted from their funds and paychecks to build up Maryland's pot of funding before the program begins awarding benefits.

The contribution rate will be a 50/50 split between employers and employees. The actual rate amount for both employers and employees is currently being considered by Maryland's Secretary of Labor and is supposed to be announced by October 1, 2023.

Then this rate amount will be deducted from funds and paychecks starting on October 1, 2024, and will remain at that rate through June 30, 2026. It has been determined that the total contribution rate cannot exceed 1.2% of an employee's wages up to the Social Security wage base.

What is the Employee Requirement for Eligibility?

Beginning October 1, 2024, every employee working in Maryland must begin contributing to the FAMLi Program's fund.

A covered employee is defined as one who has worked at least 680 hours over a 12-month period immediately preceding the date on which leave is to begin. This includes full-time, part-time, private sector and government employees. However, this does not include federal government employees.

The 680 hours can be made up of multiple jobs worked (in Maryland) over the 12-month period. The Department is in the process of determining if benefits apply to those who work remotely out-of-state for a Maryland employer, or those who work remotely in Maryland for an out-of-state employer.

What is the Employer Requirement for Eligibility?

Beginning October 1, 2024, every employer in Maryland with 15 or more employees must begin contributing to the FAMLi program's fund. Self-employed individuals are not required to contribute; however, they may choose to opt-in to the program.

Covered employers include any person or governmental authority that employs at least one individual in the state of Maryland.

When Can Employees Use the Benefit?

Employees can submit claims for benefits starting January 1, 2026.

What are the Employee Obligations to utilize the Benefits?

Employees have up to 60 days before the anticipated start date of leave and no later than 60 days after the start date of leave to file an application for benefits.

If it is "Foreseen Leave", an employer may require an employee to provide the employer with written notice of their intention to take leave at least 30 days before starting the leave.

If it is "Unforeseen Leave", the employee shall provide notice to the employer as soon as practicable.

Employers cannot require that their employees use or exhaust paid vacation, paid sick leave, or other paid time off under an employer policy before or while receiving FAMLI benefits. The employer and employee, however, can agree that the employee will use available paid vacation, sick leave or other time off to receive up to 100% of the individual's average weekly wage during their FAMLI leave period.

What's Next?

Since there are so many unknowns at this juncture, we will continue to provide updates as information becomes available. Right now you just need to know what is on the horizon. Since the contributions from both employee and employer do not begin until 2024, this allows ample time to plan for this new financial obligation.

Be sure to check the Franklin County Free Press weekly for updates on FAMLi Program and other pertinent articles. You can also find tax tips and other factoids by following Saunders Tax on Facebook and Twitter and by following me, Bev Stitely, on Linked In.

Saunders Tax & Accounting is open Monday through Thursday from 9 am to 5 pm and is available online at www.SaundersTax.com. Awarded the Hagerstown Chamber of Commerce "2023 Small Business of the Year", we have been providing a Less Taxing Life and More Prosperous Solutions since 1984!