In February of 2017, D.C. joined seven other states in implementing a Paid Family Leave program when it passed the Universal Paid Leave Amendment Act. As one of the most progressive paid leave laws in the country, this new law provides up to eight weeks of paid leave to bond with a new child, six weeks to care for a family member with a serious health condition, and two weeks to care for your own serious health condition. The program will be funded with a 0.62% increase in D.C. employer payroll taxes. All employers with D.C. based employees must contribute to the Paid Family Leave benefit fund, even those that already have a leave program in place.
While the Paid Family Leave benefits will not be administered until July 1, 2020, D.C. will begin collecting taxes from employers to fund the benefit beginning today, July 1, 2019. Since the tax will be based off quarterly wages, employers will need to submit wage information for April, May, and June to the D.C. Department of Employment Services (DOES) by no later than July 31, 2019.
Employers have four main responsibilities in the coming weeks, months, and years:
- Register/Update your DOES Account on the Employer Self-Service Portal:
The online tax portal will be available July 1st and will be the mechanism for reporting quarterly wages. Many businesses should already have a registered account on the DOES Employer Self Service Portal (ESSP), which they use to report wages for unemployment insurance. This same account can be used to manage your business’ Paid Family Leave tax information. Employers should confirm that their contact information is up to date in ESSP to ensure that they receive important communications related to tax requirements. This portal will be used to file wage reports, pay contributions, receive notifications, verify worker wage information, and update business information.
Covered employers with five or more covered employees must use the ESSP system. Employers with fewer than five covered employees who do not have access to a computer may notify DOES and request to register and communicate via paper.
Employers are also be able to grant third-party administrators, payroll service providers, and related agents access to their portal so they can file the necessary wage reports and pay contributions on the employer’s behalf.
- Pay the Paid Family Leave Tax:
The Paid Family Leave benefits will be funded by a 0.62% quarterly payroll tax paid fully by the employer and based on the past quarter’s gross wages paid to covered employees. The wages for covered employees will be the same as those reported for unemployment insurance purposes, but the tax is paid on the full amount of wages paid and not subject to any cap.
Employers’ wage reports and contributions are due on the day after a quarter ends, so July 1st for this past quarter (April 1—June 30). The final deadline to file, however, is not until the last day of the month following the close of a quarter. Employers therefore have until July 31, 2019 to file their first report of wages using the ESSP portal. Reports and contributions filed after that date will be considered late and subject to penalties. Similarly, for the next quarter (Quarter 3 of 2019), the report on wages is due no later than October 31, 2019 for wages paid from July 1-September 30, 2019.
- Keep Records:
Employers must keep on hand payroll records for at least three years and treat these records confidentially. These records should include each worker’s name, social security number (or tax identification number), pay period dates and date of payment, wages for each pay period, method of payment, and the earnings of employees. Additional employer recordkeeping obligations will be required once paid leave benefits become available.
- Notify your Employees:
All businesses must post an employee notice about Paid Family Leave in a conspicuous location and must notify employees of the benefits available annually, at the time of hire, and if leave is anticipated. Employees should be prepared to comply with these notice requirements beginning January 1, 2020.
The Office of Paid Family Leave website contains various resources, including webinar recordings, answers to frequently asked questions, sample notices, and the Paid Family Leave Final Tax Regulations. If you have questions about how to comply with your obligations under the Paid Family Leave program, please contact us.