Many New Jersey workers will see a big jump in how much they contribute to paid family leave and temporary disability insurance to help finance a major expansion of both programs signed into law by Gov. Phil Murphy earlier this year.
The programs were overhauled after progressive advocates said the payouts were too low for workers who need to replace wages they lose while out of work on a disability or to care for a newborn or sick relative.
But the expanded benefits come at a price.
Paid family leave is entirely funded by New Jersey workers through a payroll deduction, similar to how you pay into unemployment insurance. Both employees and employers contribute to the temporary disability insurance program.
How much more workers could pay next year was revealed last week in documents supplied for state budget hearings.
The state labor department estimated the maximum payroll deduction for temporary disability insurance will rise from $58.48 this year to $235.80 next year, while the maximum deduction for family leave insurance will increase from $27.52 this year to $117.90 next year.
The increases break down like this:
For the two programs combined, the current payment is $86 for workers making $34,400 or more.
That payment will rise to $92.88 for a worker making $34,400. A worker making $60,000 will kick in $162. And someone making $131,000 or more will pay a total of $353.70.
The taxes are for individual workers, and only those who work in New Jersey, including out-of-state residents.
New Jersey’s temporary disability and family leave laws still remain one of the most affordable state-managed programs even with the increases, according to Yarrow Willman-Cole of Rutgers University’s Center for Women and Work.
“You’re treating workers as whole people. You’re not saying you’re a worker and only a worker," she said. "You’re saying you can take care of your health and well-being and then come back to work.”
The payroll tax hikes will pay for increased benefits, such as longer paid leaves and higher payouts.
Right now, new parents and caregivers can receive up to six weeks of benefits equal to two-thirds of their pay, but capped at $650 a week. Beginning July 1, 2020, they will be eligible to receive benefits for up to 12 weeks, and those benefits will rise to 85 percent of their weekly wage, up to $860 a week.
Increased reimbursements for paid family leave should afford more fathers the opportunity to take time to care for a newborn, while hopefully eliminating the stigma around paternity leave and breaking down the gender wage gap that’s reinforced when only women take leave, Willman-Cole said.
The maximum reimbursement for people out on disability will also rise to 85 percent of weekly wages, up to $860 a week next year.
The nonpartisan state Office of Legislative Services estimates insurance claims paid out will increase by $277 million to $363 million a year once the expansion is fully implemented next summer.
New Jersey workers alone will fund the program expansions from their paychecks. The employer contribution to temporary disability is not increasing.
Assemblyman Anthony Bucco, R-Morris, cautioned against the rising price tag when the Legislature passed the expansion bill in February. He said Thursday it’s another unwelcome tax.
“I think when people are asked whether or not they’d rather have the money in their pocket or give the money to state government, I think the answer overwhelmingly would be leave the money in my pocket and I’ll take care of it," he said.
“We’re not talking about astronomical numbers,” he continued, “but it’s just one thing after another ... I think people want a little bit of stability. They want to wake up tomorrow and know there’s not going to be another new tax and another new fee. And I don’t think people in New Jersey have that luxury.”
Former Gov. Chris Christie, a Republican, vetoed a similar bill in 2017, saying that the cost of the expansion would be too much to bear for New Jersey workers.
The overhaul, however, was long desired by labor advocates who said many low- and middle-income families simply cannot afford to take the time off because the payouts from both programs is too low.
In signing the bill, Murphy said: “No one should ever be forced to choose between caring for a family member and earning a paycheck. By providing the most expansive paid family leave time and benefits in the nation, we are ensuring that New Jerseyans no longer have to face such a decision and that working families are treated with the respect and dignity they deserve."
Roughly 33,800 people applied for family leave insurance in 2018 and received $100 million in benefits, according to the Department of Labor. Workers collectively paid $199 million into the insurance fund last year.
About 94,200 people applied for temporary disability in 2018 and received $405 million in benefits. Workers kicked in $296.5 million, and employers paid in $270 million.
Right now, New Jersey workers are taxed only on their first $34,400 in wages for both programs. Next year, they’ll be taxed on their first $131,000 in wages.
The rates will also go up: from 0.08 percent to 0.09 percent for family leave insurance, and from 0.17 percent to 0.18 percent for temporary disability insurance.
A spokeswoman for Murphy declined to comment on the new tax rates.
Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.
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