We often are asked how an employer’s existing short-term disability (“STD”) policy will interact with new state medical leave programs. While we advise clients on the interaction with programs in many states, this post will focus on the programs in Massachusetts, Connecticut, and Maine[1] to explain how clients can coordinate their existing STD policies with state paid family medical leave (“PFML”) programs. The concepts addressed in this post nevertheless may help analyze other state PFML programs, although the details of those programs may differ.
Short-term disability insurance is a type of insurance that provides partial income replacement to employees who need to take leave due to illness or injury and are unable to perform their job duties.[2] The Massachusetts, Connecticut, and Maine PFML programs provide eligible employees partial pay benefits for leaves of absence not only due to an employee’s serious health condition, but also to care for a family member with a serious health condition, for the birth or placement of a child, and for additional reasons depending on the individual leave laws.[3] This post focuses solely on the interaction between taking paid medical leave under PFML programs for an employee’s own serious health condition, including childbirth, and employer-provided disability programs.
One of the most significant distinctions between PFML and STD benefits is that PFML generally provides job-protected leave from work with income replacement, while STD provides only income replacement.[4] If an employee receives STD benefits, they are typically granted leave from work through PFML, federal FMLA, or other employer-provided leave of absence. Because STD alone does not provide leave of absence from work, an employee will need to apply for and be granted some form of leave from work to obtain STD benefits.
Medical Leave
STD policies provide benefits if leave from work is granted for an employee’s disability, including recovery from childbirth. In contrast, PFML provides benefits if leave from work is granted for either medical or qualifying family leave reasons. PFML medical benefits are typically available for an employee’s serious health condition, defined in ways that do not always reflect the definition of disability under an employer’s STD policy. To demonstrate these differences in the availability of benefits:
- Massachusetts’ PFML law defines “serious health condition” as “[a]n illness, injury, impairment or physical or mental condition that involves: (a) inpatient care in a hospital, hospice or residential medical facility; or (b) continuing treatment by a health care provider.”[5]
- Connecticut’s Paid Leave law defines “serious health condition” as “an illness, injury, impairment, or physical or mental condition that involves inpatient care in a hospital, hospice, nursing home or residential medical care facility; or continuing treatment, including outpatient treatment, by a health care provider….”[6]
- Maine’s PFML law defines “serious health condition” as “an illness, injury, impairment, pregnancy, recovery from childbirth or physical, mental or psychological condition that involves inpatient care in a hospital, hospice or residential medical care center or continuing treatment by a health care provider.”[7]
Many of the PFML programs in other states use a definition of “serious health condition” similar to those above, with differences that may affect the scope of medical benefits available to an employee experiencing an illness or injury.
Each STD policy may define “disability” differently, but as an example, the term may be defined as: the employee is limited from performing the material and substantial duties of their regular occupation due to their sickness or injury; and the employee has a 20% or more loss in weekly earnings due to the same sickness or injury. The terms of an STD policy may vary, but the general principle that STD eligibility is distinct from PFML eligibility will remain.
As state PFML programs use a “serious health condition” definition instead of a “disability” definition to determine eligibility, there may be situations where an employee qualifies for either PFML or STD, but not both. In many cases, eligibility for PFML and STD benefits will align, such as recovery from childbirth or where the employee’s injury/illness limits the employee’s ability to perform the functions of their job, and the employee requires medical leave that will result in a loss of earnings.
Length of Available Benefits
Even if an employee is eligible for both PFML and STD benefits, the employee may exhaust one benefit before the other. Maine and Connecticut allow employees to use up to 12 weeks of PFML benefits for medical leave purposes within a benefit year.[8] Connecticut allows for up to two additional weeks of medical leave for a serious health condition resulting in incapacitation that occurs during pregnancy. Massachusetts allows an employee to use up to 20 weeks of PFML benefits for medical leave purposes in a benefit year if the employee has a serious health condition that incapacitates them from work.[9]
In contrast, while the length of STD benefits varies, policies typically grant up to 26 weeks or 6 months of STD benefits. In most cases, STD and PFML benefits are not available for the same length of time, and STD benefits may be available to employees for a longer time than PFML benefits. Also, STD benefits do not necessarily coincide with employer-provided leaves of absence. To continue receiving STD benefits after PFML leave and benefits are exhausted, an employee must obtain another form of leave from their employer, such as unpaid medical leave of absence, FMLA leave, or leave as a reasonable accommodation under the Americans with Disabilities Act.
No More than 100% of Regular Weekly Wages
An employee taking PFML leave is paid primarily through the PFML program, and if there is an employer-provided STD program, the STD benefits typically supplement the PFML benefit. The Massachusetts, Connecticut, and Maine PFML programs do not reduce any PFML benefit payments to employees based on any supplemental payments received through an employer’s STD program, to the extent the payments combined with the PFML benefit do not exceed the employee’s typical weekly wage.
However, in many cases, the STD policy will explicitly reduce the STD benefit by the amount received under PFML, rather than supplement the PFML benefit. Depending on the employee’s weekly wages, PFML benefits may be higher than STD benefits, as STD policies may be structured to provide income replacement of anywhere from 40% to 100%. The Massachusetts PFML program, for example, provides up to the maximum benefit of $1,170.64 per week, often resulting in an employee not receiving any STD benefits while also receiving PFML benefits.[10]
Many employers are unaware of benefit offset provisions when adopting a STD policy. These provisions can be a trap for unwary employers that intend to provide both PFML and STD benefits to supplement each other, allowing employees to receive income replacement equal to their typical weekly wage. These provisions can result in employees receiving only PFML benefits for the duration of their PFML leave, as their STD benefits may be reduced to zero or a nominal amount after the offset.
We often are asked to review STD policies after the fact for this specific issue. Having legal counsel review STD policies before they are finalized can go a long way in alleviating future HR headaches.
What about Transitioning to Long-Term Disability (“LTD”)?
LTD policies typically require an employee first to receive benefits under the employer’s STD policy to obtain LTD benefits. In many cases, employers use the same carrier for LTD and STD benefits, and the policies will use the same definition of “disability” to determine eligibility for benefits. An employee typically must be “disabled” under standards established by the LTD and STD policies for the entire length of STD benefits (usually six months) before they are eligible for coverage under the LTD policy. This is known as the “exhaustion period.”
Employees often are denied LTD benefits if they did not receive STD benefits during the LTD policy’s exhaustion period, so the importance of applying for both PFML and STD benefits when a need for medical leave arises cannot be overstated. If an employee takes PFML benefits and applies for LTD benefits without first applying for and exhausting STD benefits, the employee will likely not be eligible for LTD benefits because they did not receive STD benefits for a disability during the exhaustion period. To avoid the situation where an employee failed to apply for STD benefits, was granted PFML benefits, and was unable to receive LTD benefits for that same disability because they failed to apply for STD benefits at the time PFML benefits were granted, it would be prudent for an employer to require its employees to apply for STD benefits, if needed, when applying for PFML benefits.
Recommendations
Concurrent PFML and STD Applications
Often, PFML and STD benefits will both be available to an employee for the duration of their illness or injury. In this situation, we recommend requiring employees to complete and submit PFML and STD applications concurrently, as this approach not only avoids the outcome described in the preceding paragraph regarding eligibility for LTD benefits but also limits an employer’s exposure to extended periods of leave. Specifically, if an employee applies for PFML and STD benefits at different times, it may result in the employee receiving PFML and STD benefits consecutively, rather than concurrently, which in turn may lead to requests for longer leaves of absence from work.
One hurdle in having employees complete concurrent applications is that the application processes for PFML and STD are typically separate and may require duplicative forms. It may be most efficient for Human Resources to use a single package of streamlined paperwork to address medical leave and benefits, including using one form for medical certification, leave requests, and applications for paid benefits. However, the ability to have streamlined paperwork may depend on the documentation requirements for the STD policy.
In short, concurrent applications ensure that employees will receive the maximum weekly income replacement benefit for which they may be eligible, while also ensuring that the two benefits run concurrently, which may reduce employer exposure for extended periods of leave.
Combined PFML-STD Policies
Another way to simplify the medical leave benefit process is to offer combination PFML-STD policies that provide one medical income replacement benefit to employees that equals or exceeds the state-required PFML benefit. Not only would this address potential benefit offset concerns arising from having multiple medical income replacement benefits available, but using a combined policy also may ease administrative burdens by reducing duplicative applications and the headaches associated with tracking multiple medical leave benefits.
Many states, including Massachusetts, Connecticut, and Maine, have a private plan exemption process that allows employers to request approval to provide a private PFML program to their employees that meets or exceeds the state PFML program requirements. Some states, including Massachusetts, maintain a list of approved carriers of fully insured PFML policies; however, employers can also request approval for an exemption for a self-funded plan.
The private plan exemption may also qualify the employer for an exemption from state-mandated employer and employee contributions to the state PFML program. Instead of contributing to the state PFML fund, the employer’s, and in some cases, the employees’ contributions may be used by the employer to fund the approved private PFML plan. The exemption process does not permit an employer to require employees to contribute an amount higher than the contributions required by the state PFML program.
A private PFML-STD program may alleviate administrative burdens and reduce employer costs by sponsoring a single medical benefits policy.
[1] Under Maine’s program, employees will not be eligible for benefits until May 1, 2026.
[2] Five states have state-mandated short-term disability programs, and this blog post does not address those programs.
[3] For example, Connecticut’s Paid Leave program allows an employee to take medical leave to serve as an organ or bone marrow donor.
[4] Connecticut’s Paid Leave program is unusual in that it only provides income replacement and does not provide job-protected leave. Job-protected leave is available through Connecticut’s unpaid FMLA program – and the combination of the Paid Leave and FMLA forms the basis of Connecticut’s PFML program.
[5] 458 C.M.R. § 2.02.
[6] Regs. Conn. State Agencies § 31-51qq-1(x) and consolidated-policies-document—final-12092022.pdf CTPL-001-DEF.
[7] 26 M.R.S. § 850-A(28).
[8] See 12-702 Code Me. R. Ch. 1 § III.B.1; CT Fact Sheet for Employers updated Oct 2024; and Regs. Conn. State Agencies § 31-51qq-11.
[9] 458 C.M.R. § 2.08(8)(d).
[10] This is the maximum Massachusetts PFML benefit. Maine’s maximum weekly benefit will be equal to the state average weekly wage once benefits are available in 2026, and the state average weekly wage is currently set at $1,103. Connecticut’s maximum weekly benefit is 95% of weekly wages, up to $981.
