In 2020, Colorado voters approved a measure to create a paid Family and Medical Leave Insurance (FAMLI) program. Employers and their employees are both responsible for funding the program and may split the cost 50/50. The premiums are set to 0.9% of the employee’s wages, with 0.45% paid by the employer and 0.45% paid by the employee.

While FAMLI benefits won’t be available to employees until 2024, Colorado businesses must begin collecting premiums starting on January 1, 2023. This means that if you are subject to the FAMLI Act and are about to run your first payroll for 2023, you must coordinate with your payroll processor to ensure deductions begin immediately.

If an employer does not deduct the employee’s premium portion from the employee’s gross wages, the employer must also pay the employee’s portion. Employers cannot collect missed premiums from employees in later pay periods. An employer who pays the employee premium portion on behalf of its employee must include the amount of the premiums paid in the employee’s gross wages for income tax and FICA tax purposes. These employer-paid amounts may also be considered “compensation” for other benefit plan purposes, so be sure not to overlook these payments if made on the employees’ behalf.

Since the Colorado FAMLI program provides employees with twelve weeks of paid family and medical leave and was enacted to supplement other forms of required leave under Colorado and federal law, this is also a good time to consider other leave policies as well as employer-sponsored paid time off / disability plans and programs. FAMLI leave can run concurrently with those plans and programs and can fit together to make an employee’s wages whole during his or her leave. Employers will want to ensure they are not paying more than 100% of an employee’s wages during a family and medical leave, putting the employee in a more wage-favorable position then when not on leave.

Although withholding of employee premiums must begin on January 1, 2023, employers do not need to start remitting these withholdings (plus the employer’s share of the premiums) until April 30, 2023. The employer must also register with the state here: https://famli.colorado.gov/