It’s no surprise that self-employed workers have a lot of questions about Colorado’s new paid family and medical leave program. After all, solo entrepreneurs and independent contractors have historically had to use their own personal savings to make ends meet when facing life events that take them away from work.
But Colorado’s new Family and Medical Leave Insurance (FAMLI) program is available to all workers when they need to take time for life events such as welcoming a new child, caring for themselves or a family member facing a serious medical event, or preparing for a loved one’s military deployment.
Best of all, the insurance is completely optional for self-employed workers. And for those who choose to participate, they don’t need to do anything until benefits become available in 2024.
Let’s break down how FAMLI works for self-employed workers, independent contractors and others who might not consider themselves traditional employees:
- FAMLI participation is optional for self-employed workers.
- For self-employed workers who want to access paid family leave insurance, FAMLI participation requires an agreement to pay premiums (and report their wages) for a period of three years. To brush up on premium rates and determine your potential benefits, check out our handy calculator here.
- Unlike health insurance, there is no enrollment period for getting FAMLI coverage. That means you don’t need a crystal ball to predict when you might need to step away from work. After qualifying for coverage, self-employed workers and independent contractors can file claims and access benefits, and then will be responsible for paying premiums for the following three consecutive years.
- You may voluntarily submit your wage data in 2023 to prepare, but this is not required. No action is necessary until benefits become available.
- If you know you don’t want to participate in FAMLI, you don’t need to take any action to opt-out–simply don’t do anything.
If you are a sole proprietor, or an owner of a family business that does not have any employees, or use an S-Corp business structure and are still unsure whether you qualify as “self-employed,” here are some things to know:
- The structure of a business isn’t what matters for FAMLI compliance. What matters is whether the business has qualifying employees.
- If you have at least one qualifying employee, you will need to register with the Division, submit wage data and send in premiums on behalf of that employee.
- Not sure whether a relative, fellow owner or business partner counts as an “employee”? Under the FAMLI Act, an “employee” is any individual, including a migratory laborer, performing labor or services for the benefit of another, irrespective of whether the common law relationship of master and servant exists. The FAMLI Act’s definition of “employee” includes a two-prong exception:
- If a person is both primarily free from control in the performance of their work, and that work is part of their independent profession or trade, then that person is not an employee and payments to them would not be subject to premiums. §8-13.3-503 (7) C.R.S.
- Individuals who meet this exception would be considered “self-employed,” and their participation in FAMLI is optional.
Calculating Your Wages as a Self-Employed Individual
Self-employed workers who voluntarily wish to participate in FAMLI will only be responsible for paying the 0.45% employee share of the premium. Self-employed workers may decide between reporting their gross income or net earnings from their self-employment in order to determine their quarterly premium payments and potential benefit payments. Self-employed individuals will be able to change between net earnings and gross income one time within a coverage period. If you decide to participate, you will report your earnings and pay your premiums within My FAMLI+ Employer after self electing coverage once FAMLI benefits become available in 2024.
The FAMLI Division may require copies of tax returns, bank records, self-attestations, or any other documents to verify or determine the income of individuals electing coverage as a self-employed individual.
Colorado’s FAMLI Division will be rolling out a variety of tools later this year to help everyone understand how to access paid-leave benefits in 2024. Subscribe to our newsletter to make sure you hear about our webinars, public meetings and other tools to help prepare. And let us know what questions you have about paid family and medical leave. Drop us a line at cdle_famli_info@state.co.us or give us a call at 1-866-CO-FAMLI (1-866-263-2654) to ask your questions.