Discuss Paid Family Medical Leave, Administrative Options and Cost Sharing

This case, as shown below, provides additional information in an attempt to provide a general overview of the new Paid Family Medical Leave law and processes.  Specifically, staff will need the City Council's direction regarding 1) consensus direction to opt for a private vendor, and 2) consensus direction regarding cost sharing.  One private vendor, Met Life, is approximately $10,000 less expensive than the State of Minnesota and has experience administering the program in other states.  

Background of the Program
Paid Family Medical Leave will have an administrative impact on the City's Human Resources staff and Finance Department staff in terms of overseeing the program; how much of an impact is yet to be seen.  According to the State of Minnesota, it created its Paid Family and Medical Leave (PFML) program to ensure that workers can take time off for major life events without sacrificing their income or job security. The program has many similarities to the Federal Family Medical Leave Act, but that program can be paid or unpaid and is more narrow in its eligibility.  The new program, launching in 2026, is rooted in a few key goals:

- Support for Families: It allows people to care for a new child, a seriously ill loved one, or recover from their own health issues—without financial strain.
- Economic Stability: By providing partial wage replacement, the program helps families stay afloat during difficult times, reducing reliance on emergency aid or debt.
- Workforce Retention: Employees are more likely to return to work after leave, which benefits employers by reducing turnover and training costs.
- Equity and Access: Not all workers have access to paid leave through their employers. This state-run program levels the playing field, especially for part-time, low-wage, or gig workers.
- Public Health and Well-being: Encouraging people to take time off when needed can lead to better health outcomes and stronger family bonds.
The program is funded through a shared premium between employers and employees, and it covers up to 20 weeks of leave per year for qualifying events

Plans Equivalent to the State plans for Paid Leave
Employers can choose to meet their responsibilities under Minnesota Paid Leave by providing employees with an equivalent plan that meets or exceeds the coverage offered by the state.  There are two types of paid leave equivalent plans:  1) Insurance carrier plans and 2) Self-insured plans.  An equivalent plan must offer the same or better coverage than Minnesota Paid Leave, and it must not cost your workers more than they would be required to contribute under the state plan. It must also provide job protections equal to those in the state plan.  There is a one-time $500 fee payable to the State if a private vendor option is implemented.  

Employers approved for an equivalent plan will not pay premiums to the state, but will have other obligations under Minnesota Paid Leave. Employers must still submit wage detail reports to the state each quarter and comply with requirements to notify employees about paid leave coverage.

Minnesota Paid Leave provides both Medical Leave, for an employee's own healthcare needs, and Family Leave, to care for others. Workers can take up to 12 weeks of Family or Medical Leave in one benefit year, or up to 20 weeks total if they qualify for both types of leave in the same year.

An approved equivalent plan can cover both Family and Medical Leave, or only one leave type. Employers who offer an equivalent plan for only one type of leave must pay premiums and participate in Minnesota Paid Leave to provide coverage for the other type.

Equivalent plans for Family or Medical Leave must meet the following conditions:

• All employees who are covered under the state plan must be covered under the equivalent plan.
• Eligibility requirements cannot be stricter than those in the state plan.
• Weekly payments must be at least equal to those provided by the state plan and separate from other benefits.
• The total amount of leave available must be at least equal to the amount provided by the state plan.
• Job protections must be at least equal to those provided by the state plan.
• Costs to employees cannot be more than what their premiums would be under the state plan.
• For Medical Leave, the equivalent plan must cover any serious health condition, or medical care related to pregnancy, that would be covered under the state plan.
• For Family Leave, the equivalent plan must cover any care for a family member with a serious health condition, bonding with a child, a family member called to active duty military service, or any safety leave event that would be covered under the state plan.
• The equivalent plan must offer intermittent leave or reduced schedules consistent with the state plan.
• The equivalent plan cannot impose any additional conditions or restrictions on the use of leave beyond those in the state plan.
• Coverage must continue for 26 weeks after employee separation, or until the individual is hired by a new employer.
• If a leave application is filed by a former employee, the equivalent plan must pay benefits for the full time of leave. Equivalent plans may not cut off eligibility for a former employee during an approved leave.

Key Dates for the Program

• The first quarterly wage detail reports were due on October 31, 2024. These reports are submitted by employers and detail the wages paid to employees between July 1, 2024, and September 30, 2024.
• Paid Leave is paid for by premiums on employee wages, split between the employer and employees. Employers can begin to deduct the employee share of the premium on January 1, 2026, when benefits become available. Employers will pay the first premiums to the State of Minnesota's Department of Employment and Economic Development by April 30, 2026. First premiums will be based on wages paid from January 1, 2026 to March 31, 2026.

PFML and Whole Compensation
PFML will only cover a portion of employee's wages.  In order for employees to be made whole, they will need to utilize other accrued leave benefits to supplement PFML, not to exceed 100% of the regular wage. This will be a shared function between HR and payroll.  

Request for Proposals (RFP)/Private Vendor Options
The City's benefit broker for ancillary benefits is Integrity Benefits.  Staff requested to be included in the RFP put out by Integrity Benefits.  A summary of the results is attached.  The plans shown on the summary meet or exceed the State's plan.  

Why MetLife as a Private Vendor with Integrity Benefits
There are three major considerations for PFML.  For years, staff has successfully partnered with Integrity Benefits and has confidence in them to assist with administering this new mandatory Minnesota PFML benefit.  Integrity Benefits provided the following summary regarding Met Life, a possible private vendor:

1)  Price – The savings with MetLife would be $10,000 per year as compared to the state and the runner up vendor, New York LIfe. 
2)  Rate guarantee – MetLife will offer a 2 year rate guarantee if the City has 2 fully insured products with them (Life, STD, LTD, Dental, Vision or Supplemental Health).  This would drop to a 1 year rate guarantee if the City can only transfer one fully insured product.  Note, at the time of this writing, staff is still looking into this matter. 
3)  Administration – The expected turnaround time for claims for the State is 55-60 days.  The turnaround time for MetLife is around 2-5 business days once all the information has been gathered.  Integrity Benefits would be the city's service contact for the MetLife service team. Unlike the State of Minnesota, Met Life has experience administering PFML.   

Cost Sharing
Based on staff's findings, most cities are planning to split the costs with employees 50/50.  This is a matter that requires negotiation with the unions and an update to the Personnel Policy. As a reminder, the city's current union contracts expire on December 31, 2026.  Staff will be seeking City Council feedback regarding cost-sharing with non-union employees and would require a closed session to discuss cost-sharing for union employees.  At this time, staff is only seeking general direction on cost-sharing based on a 50/50 split; pursuant to Minn. Stat. 268B.14.  

Approximately 20 minutes.

The required funding for this program will be accounted for in the 2026 budget. 

Based on discussion.

Based on discussion.