Since July 1, 2020, employers have been required to provide DC Paid Family Leave (PFL) benefits to their DC workers. DC PFL includes up to two weeks of medical leave benefits for an employee who is unable to work due to illness or injury.
A temporary law was recently passed in DC that prohibits insured short-term disability (STD) policies from reducing the STD benefit by amounts payable from the DC PFL. The law is currently effective May 26, 2021 through August 24, 2021. By August 24, an additional temporary law is expected to go into effect that will extend the expiration date to sometime in early 2022. A permanent bill will be introduced later this year to make the law permanent.
Who is impacted:
Employees who work in DC and are covered under their employer’s insured STD policy are now able to receive their full STD benefits from their employer’s insurance policy in addition to their DC PFL benefits.
If the employer’s disability leave benefits are self-insured, the employer’s policy is not impacted by this restriction, whether the benefit is paid through payroll or administered by a carrier.
Why this law was enacted:
STD policies routinely include a clause that offsets the policy’s STD benefit by amounts available to the employee from certain other sources, including government paid leave benefits such as DC PFL. This offset results in savings for the insurance carrier instead of a source of income for the employee.
For example, an employee who gives birth is eligible for both STD and DC PFL benefits. Under DC PFL, the employee could apply for two weeks of medical leave benefits plus 6 weeks of parental leave, or just apply for eight weeks of parental leave benefits. Some STD carriers were reducing the STD payment by two (or more) weeks of DC PFL benefits, even when the employee did not apply for them.
What employers with DC workers need to do:
Employers who sponsor insured STD plans should review their leave policies and disability communications and remove any language that indicates that the STD benefit will be offset by DC PFL benefits.
