The Connecticut Paid Leave Authority (CTPLA) will be sitting on a fund balance of more than three-quarters of a billion dollars by the end of 2026, according to actuarial projections outlined in a meeting on Friday.
The CTPLA is responsible for overseeing Connecticut’s paid family and medical leave program signed into law under Gov. Ned Lamont in 2019, which offers paid time off for private sector employees and is funded by a payroll deduction.
The actuarial report compiled by the Spring Group showed the Authority’s fund balance growing from $557 million as June 2023 to $761.7 million by fiscal year 2026, as collections from the .5 percent payroll deduction on employee paychecks have outpaced claim payouts.
The report showed CTPLA took in $433.3 million in employee contributions and $17.4 million in investment income, while paying out $309.1 million in claims and $40.9 million in administrative costs, leaving a balance of $100.7 million.
Although employees were able to start applying for paid family and medical leave in January of 2022, the paycheck deduction commenced a full year before the benefit was available in order to build up the fund.
The ending yearly balance is expected to decrease from this year’s $100 million to $54.3 million by 2026 as the actuarial company expects a higher number of future claims and higher payouts as wages rise, but the overall effect will leave CTPLA sitting on a hefty balance.
The ballooning balance made at least one board member uncomfortable. Board member John Scott questioned if it was possible to reduce the fee deducted from employee paychecks to keep more money in the Connecticut economy.
“Basically, what we’re saying here is in 2026 we’re going sitting on three-quarters of a billion dollars in our fund?” Scott said. “I see us sitting on so much taxpayer money, it just doesn’t feel right to me.”
Under the Connecticut law creating the family and medical leave program, the employee deduction can be reduced if it’s determined the CTPLA can meet its obligations with a lower rate.
“We’ve been wondering, too, if there’s a magic number less than a half a percent that would be appropriate, but not jeopardize the long-term solvency because can’t rely on revenue being higher than spending forever,” said Erin Choquette, CEO of the CTPLA.
“We have 18 months of clean data, we don’t even have two full years,” Choquette said. “So, did see that the claims rate was pretty flat for about 15 of those months, they are starting to increase. We’ve had two to six weeks of the highest claims ever in terms of payouts, so we anticipate claims to go up.”
“We want to be really careful, because it’s easier to go down than to go back up,” Choquette added. “Our job is not to have that balance grow for the sake of growing. We just want to make sure we don’t hit a cliff.”
The actuarial firm projected claims to rise by roughly $95 million between this year and 2026, faster than projected revenue increases, so there may be a point in the future when the CTPLA begins to payout more than it is taking in, according to the actuarial presentation.
Harinda Sebastian of the Spring Group who presented the actuarial findings said he expects paid leave claims to rise based on the experience of other states, which is reflected in the analysis. “You do see the claims going up from $300 million to $400 million,” Sebastian said. “If you project out further, we would expect this to continue to go up.”
The CTPLA also maintains a reserve fund of $51.9 million for outstanding claims, which is part of the fund balance.
Employees in health care and social assistance paid the most into the program, followed by manufacturing employees and financial and insurance employees, according to the data. The analysis also projects an average payout of $778 per week for employees for the following year, based on wage and usage assumptions.
The analysis also projects that claims for employee’s own health will make up most of the claims, followed by pregnancy and bonding, and bonding with a newborn.
However, Sebastian said the full year of collecting CTPLA fees before launching the program, set the table for having a hefty fund balance.
“We do expect to have a respectable fund balance because of that,” Sebastian said. “We are in a much, much better position today because of that and because of the contribution level. It’s a good position to be in.”
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Thank you Marc for this enlightening article. Let’s hope this fund with an outsized balance doesn’t get raided down the road for general fund shortfalls as happened to the transportation and roads tax fund.