In 2018, the State of New York became the 4th state in the nation to offer paid family leave for residents. This means that workers who have a new child or need to take time off from work to provide care for a loved one can receive income during their time away from the job.
At Cultivating Wealth, we work with many self-employed individuals who, until now, haven’t had a source of paid parental leave. The New York State Paid Family Leave program is open to everyone who is employed, including those who run their own business or are self-employed in any way. This new program is a game changer for many Cultivating Wealth clients who are small business owners who in years past have foregone traditional parental leave after having a baby, or have endured financial hardship as a result of caring for an ill family member for an extended period of time.
What You Need to Know
If you’re self-employed in New York State, you can purchase your own paid family leave insurance for a nominal cost, and receive the same state benefits offered to W2 employees. Keep in mind:
- If you have employees working for your small business, you’ll need to buy a policy that covers them.
- If you don’t have employees, you can opt to purchase a policy to cover only yourself.
Paid family leave policies are coupled with short-term disability insurance. If, for example, you’re an expecting mother, you’ll not only be able to take leave to bond with your child, you’ll also receive disability benefits for the period after the birth when you’re unable to work.
The cost of the policy is based on your income, but the maximum premium for the Paid Family Leave portion of the policy is $85.56 for 2018. It’s important to remember that the paid leave will not compensate you (whether self-employed or not) for your full income. In 2018, the coverage pays 50% of salary up to $652 per week for up to 8 weeks. While this might amount to a small percentage of your actual income, it can help to offset some of the costs of not working.
The benefits are set to increase (both in duration and in percentage of salary) up until 2021 when 12 weeks of leave will be covered at up to 67% of salary (there will still be a cap on the weekly amount you can receive).
While this new law sounds great for self-employed people who don’t have another source of paid leave, there’s a catch. Once the policy is in force, there’s a waiting period of two years before you’re able to use the benefits. If you’ve just started your business, you can avoid the waiting period if you buy a policy during the first 26 weeks of setting up shop (but you’ll have to have been in business for 26 weeks before actually claiming benefits).
The good news is you can use your benefits at any point in time during the first 12 months of your new baby’s life. For example, if you’re planning to use Paid Family Leave for maternity benefits toward the end of the first year of your child’s life, and you’ve been in business for a while, you’ll want to purchase a policy at least 6 months before you become pregnant. If you want to take the leave as soon as possible after a birth, you’ll need to buy it even earlier. In short, if you’re thinking about starting a family (or growing your existing family), you need to purchase a policy as early as possible and pay the premium each year to receive the benefits.
What Else is Covered
New York Paid Family Leave coverage doesn’t stop at maternity leave after having a baby. It also covers leave for either parent after the birth of a baby, an adoption, or a foster-care placement. Even if you’re not planning to have a child in the near future, it may be a good idea to purchase a policy if you’re self-employed. If a member of your immediate family (including your child, parent, domestic partner, or spouse) becomes seriously ill, you can take paid leave to care for them. You can also take leave if a family member is deployed for active duty military service.
What You’ll Need to Do
To enroll in New York State Paid Family Leave, you need to move through a few steps – all of which are relatively straightforward. First, you’ll have to get a quote from an insurance provider. Once you’ve decided on a provider, you’ll need to submit some forms (as both the employer and the employee), and pay your first premium. To initiate a claim, you’ll need to provide proof of a qualifying event and proof of your income (this can be in the form of last year’s tax return or your 1099’s). Usually, you’ll then receive benefits every two weeks for the duration of the leave.
Interested in learning more about how to purchase a Paid Family Leave policy if you’re self-employed? Schedule a call with us. We can help.