On Wednesday, May 26, 2021, emergency legislation (B24-185) went into effect in the District of Columbia (D.C.) that prohibits the offsetting of D.C. paid family leave benefits from insured temporary or short-term disability benefits. The legislation, known as the Short-term Disability Insurance Benefit Protection Emergency Amendment Act of 2021 (“the Act”), became law without the signature of Mayor Muriel Bowser. The Act impacts employers and insurers with insured short-term disability benefit policies in D.C. and is set to expire August 24, 2021. A longer term bill (B24-186) that would extend the prohibition on these offsets has been transmitted to Mayor Bowser and is awaiting her action (see details below).
For readers unfamiliar with the industry practice of “offsetting,” here is the gist: Employees who become temporarily disabled are often eligible to receive wage replacement benefits through their employer’s private, insured short-term disability (STD) benefit policy. In jurisdictions with state-mandated disability insurance or paid family and medical leave (PFML) laws, temporarily disabled employees may be eligible to receive income replacement for the same period through the state-administered program or a voluntary plan that meets the jurisdiction’s requirements. To prevent employees from receiving more than 100% of their regular wages during this period, STD policies often indicate that benefit payments will be reduced (offset) by amounts the employee is entitled to receive under an applicable state disability or PFML program.
Which policies and entities are impacted
With the passage of the Act, insurers are prohibited from offsetting STD benefits based on the employee’s estimated or actual paid leave benefits under the D.C. Universal Paid Leave Amendment Act (D.C. UPLAA). The Act does not prohibit offsetting practices by self-insured employers or insurers merely acting as third-party administrators for self-insured employers.
On the heels of the Act, the D.C. Council passed the Short-term Disability Insurance Benefit Protection Temporary Amendment Act of 2021 (B24-186), which is on Mayor Bowser’s desk awaiting response by June 9, 2021. If signed, the bill will go through a 30-day period of Congressional review and publication in the D.C. Register before becoming effective for 225 days.
What employers should do
Employers should work with their payroll teams, vendors, and insured partners to immediately remove any offsetting practices in effect for employees receiving both insured short-term /temporary disability benefits and D.C. UPLAA benefits. Employers and insurers should make certain that any benefits paid beginning May 26, 2021, under an insured STD or temporary disability policy are not reduced by an employee’s eligibility for or receipt of D.C. UPLAA benefits. Employers and insurers should also update any policy language that authorizes such offsets.
What ReedGroup is doing
ReedGroup is working with its insured partners and benefits team to adhere to this new legislative requirement and will ensure its offsetting practices remain compliant with all applicable laws and regulations.
If you’re looking for assistance in ensuring your paid benefits are managed correctly, including which offsets are permissible and which are not, ReedGroup has benefit calculation solutions for you. Review our offerings here.
Information provided on this blog is intended for general educational use. It is not intended to provide legal advice. ReedGroup does not provide legal services. Consult an attorney for legal advice on this or any other topic.