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Paid Family Leave Bill

Business Incentives to Provide a Paid Family Leave Benefit


Last updated 3/18/2020 at 10am

HB20-1193, GOP House Alternative Family Leave Bill

Many Colorado employers are interested in providing a paid leave benefit to their employees for the birth or adoption of a child, for those undertaking foster care or suffering from a serious illness. However, the high cost of this employee benefit is often prohibitive for the employers.

In response, HB20-1193 creates a tax credit for those employers who voluntarily decide to organize and implement a family leave benefit for their employees and a tax deduction for employees who wish to start a newly created Leave Savings Account (LSA). If they wish, employees will be able to create and to contribute a maximum of $5,000 a year to an LSA. They will receive a tax deduction for the amount contributed as well as the interest earned. The qualifying employee could use their LSA for any expense appropriate to the reason for their leave.

Employers who choose to participate in this program may contribute to an employee's LSA receiving a 15% tax credit on contributions up to $3,000 annually. In addition to contributions to the LSA those employers who pay at least 50% of their employees' wages during a qualified family leave will receive a tax credit of 15% of wages paid. To avoid double tax relief, the amount an employer contributes to an LSA or pays in wages during family leave will be added back to the employee's taxable income. An employer may contribute to an employee's LSA regardless of donations by the employee. The length of employment before eligibility will be determined by the employer but may be no less than 6 months.

The family leave policy could be focused on the birth or adoption of a child, foster care parenting, a serious illness, a victim of domestic violence or an unplanned military deployment. The policy could apply to any combination of parents, either mother, father, or both. Those employers currently subject to the Federal Family and Medical Leave Act (FMLA) could make this paid leave available utilizing the same FMLA criteria with which they already comply for unpaid leave. For those employers not currently subject to FMLA, they would refer to the Federal FMLA guidelines for procedures governing leave.

The funds in an LSA belong to the employee and remain under the control of the employee. If these funds are withdrawn for any purpose other than family leave the employee will be assessed a 10% penalty. However, at the age of 65 an employee may withdraw all funds remaining in their account without penalty. A worker may take up to 8 weeks of leave in a 52-week period. If an employer with more than 25 employees chooses to participate in this program, they must maintain the position for the full duration of this leave (8 weeks or less).

The goal is to create a market-based, tax incentivized, and personal responsibility mechanism to support paid family leave (caring for a serious health need of a family member). Businesses will use this benefit as an incentive for employment.

It is good for employees, good for employers, and good for Colorado's economy.

HB20-1193 was to be heard Monday, March 16 at 1:30 p.m. in the House Finance Committee.


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