Private sector retirees who get payouts for their unused vacation or sick time may notice some money deducted from their final checks for Connecticut’s paid family and medical sick leave program, even though they’re leaving the workforce.
Connecticut’s Paid Leave Authority (CTPLA) deducts .5 percent from workers’ pay to fund paid leave when workers have to step away for medical reasons or to care for family members.
The deduction is meant to ensure the program is self-funding and so far, it’s working – the Authority is currently sitting on $500 million and a recent actuarial report estimates the Authority’s reserves will grow to roughly $760 million in the next three years.
However, the deduction also applies to payouts when an employee retires. Some residents who reached out to Connecticut Inside Investigator said they’re paying for something they’re not going to use, and that the deduction takes away money they were counting on. Those residents asked to stay anonymous but said they had reached out to legislators saying the deduction was unfair.
The Paid Leave Authority, however, disputes that the payments are for something retirees won’t be able to use.
“Even if a worker is retiring, it is still possible for them to be eligible to receive CT Paid Leave benefits,” wrote CPLA Chief Marketing and Communications Officer Jessica Vargas in an email.
Under the paid leave law, even if a worker retires, they can still claim paid leave for a covered event up to 12 weeks after retirement. They can also use the benefit if they take a part-time job.
“Per the statute, we look at a worker’s wages in the base period – the first 4 of the 5 most recently completed quarters – as determined at the time they file a claim, to determine both the worker’s eligibility and the benefit payment,” Vargas wrote.
Vargas used the example of a worker retiring in April of 2022 and then taking a part-time job in March of 2023 and then having to take paid leave in August; the worker would therefore have earnings and contributions to the paid leave program for two quarters within that statutory time frame, they would be eligible for the paid leave benefit.
“At the time a worker retires, neither we nor they will know for certain if they will experience either of these situations,” Vargas wrote. The elevated earnings from the worker’s sick and vacation payout will factor into the weekly payments for the paid leave program also boosting the amount they would receive.
Since sick and vacation payout are treated as wages, and employers report one wage number per quarter along with the paid leave contribution, there’s no way to know how much the CTPLA has received from retirement payouts, which boost the employee’s paycheck and subsequently the paid leave deduction.
The Federal Reserve found that 13 percent of retirees take on either part-time or contractual work following their retirement. It also found that 29 percent retired due to a health issue and an additional 15 percent retired to care for a loved one.
During a recent meeting of the PLA in which the actuarial report showed an increasing fund balance, the question was raised whether the .5 percent deduction could be decreased in response to the hefty balance.
The CEO of CTPLA, however, noted the analysis also showed the number of claims and payouts trending upward more rapidly than the balance and wanted to ensure the paid leave trust fund remained solvent for the future.
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