Wages are more complicated than they seem! Here’s how to understand what wages are subject to FAMLI

Monday, March 20, 2023

Submitted by [user:field_first_name]
Hide Featured Image
true

Colorado’s new Family and Medical Leave Insurance (FAMLI) program is funded through premiums paid by both employers and employees. The employee portion is paid via small payroll deductions.

Sounds simple, right? Not always. It can be a bit tricky to determine which payments from an employer to an employee are considered “wages,” making some wonder how to determine their premium payments and potential benefits.

Let’s break it down. 

Employers with 10 or more employees are responsible for sending premium payments each quarter to the State equal to 0.9% of each employee’s wages. They’re allowed to split those payments with their employees 50/50, meaning the employees contribute 0.45% of wages and employers pay the other 0.45% of wages. 

(A bit of fine print — Employers are free to pick up the entire 0.9% as an added employee benefit. Also, employers with nine or fewer employees aren’t responsible for paying any premiums themselves, however, they still must collect and remit their employees’ 0.45% share.)

Once you understand the premium payments, though, that still leaves the question of what wage to base the payments on. Many employees receive compensation through bonuses and profit-sharing programs. Do those count as wages? And what about severance payments or other payments that are made after employment has ended?

The FAMLI program is focusing only on wages that are typically received during employment. This means that post-employment payments not considered wages include severance payments, deferred compensation disbursements and pension disbursements. 

Payments that would have otherwise been paid out, had employment not been terminated, are still considered wages under FAMLI (such as final wages, salaries, bonuses, commissions, or payouts of unused PTO, vacation, or sick time.).

Still confused? We compiled this helpful chart to help clarify some common payment types that might not seem like traditional wages. Payments on the left count toward premiums and benefits; payments on the right do not.

 

Wages (subject to FAMLI premiums)

NOT Wages (exempt from FAMLI Premiums)

Payments defined as wages under the Federal Unemployment Tax Act (FUTA)

Payments for moving expenses if deduction is allowed under the federal Internal Revenue Code (IRC), IRC 127

Tips

Group Term Life Insurance

Employee contribution to 401 (k) or IRC 408 Simplified Retirement Plans

Employer contribution to 401 (k) or IRC 408 Simplified Retirement Plans and all PERA contributions

Disability payments paid in first 6 months after an employee's last date worked

Amounts paid or incurred for a dependent care plan (IRC 129) or educational assistance program (IRC 127)

Employer contributions to a Medical Savings Account

Employee contributions to a Medical Savings Account

Employee contributions into IRC 219 Simplified Employee Pension Plan

Employer contributions into IRC 219 Simplified Employee Pension Plan

Payments made by public school or 501 (c)(3) into annuity contract into deferred compensation plan because of a salary-reduction agreement

Value of meals or lodging furnished by employer if such items are excluded from income as described in IRC 119

Payments for personal services, including anything other than cash that has cash value, like a housing allowance, (except payments to agricultural or domestic workers, which much be cash to be wages)

Employer contributions to a Salary Reduction Simplified Employee Pension Plan (SARSEP)

Employee contributions to a Salary Reduction Simplified Employee Pension Plan (SARSEP)

125 Cafeteria Plan if qualified benefit chosen

125 Cafeteria Plan if cash is chosen

Post employment payouts limited to severance agreements, deferred compensation disbursement, and pension disbursement

Paychecks issued post-employment for final wages, salaries, bonuses, commissions, or payouts of PTO, vacation, or sick time.

HSA contributions up to the maximum allowed under IRC 106

Nonqualified deferred compensation disbursed during employment

Stocks as described in IRC 422 and 423

All other stock options not exempt

Legal settlement payments from the employer to the employee

Contributions made by governmental entities and their employees into deferred compensation plans once contributions are vested

 

We understand that no chart answers every scenario! So if you still have questions about what to count as “wages” for FAMLI purposes, give us a call at 1-866-CO-FAMLI any weekday between 8 a.m. and 4 p.m. MT and we’ll help you figure out the required payments for your unique situation.