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Statutory voluntary plans: navigating acquisitions and divestitures
As employers prepare for new statutory states in 2026, there is a topic less frequently discussed that must be considered when it comes to establishing private plans: acquiring or divesting company assets. In this blog, we’ll examine three states and share how their employers can navigate acquisitions and divestitures.
Before I dig in deeper, it’s important to note that not all statutory paid family and medical leave laws and regulations directly address upcoming statutory state changes. Most laws and regulations for statutory paid leaves do not have specific requirements for acquisitions and divestitures. Instead, they include definitions of a successor-in-interest or have specific provisions related to successors. For example, Colorado and Oregon include a successor-in-interest in their definition of an employer.[i] Under New York’s paid family leave (PFL) law, an employee retains eligibility for PFL when an employer becomes a successor to the previous covered employer or acquires the trade or business of the previous covered employer, which includes joint ventures.[ii]
State #1: California
California has specific rules regarding successor liability. That said, employers with a voluntary plan in California must inform the Employment Development Department (EDD) of any successorship. When an employer acquires a corporation that is distinct from its own and continues its operation without substantial reduction in force, that employer is deemed to have consented to the terms of the acquiring corporation’s voluntary plan. This means the employer that acquires the voluntary plan is agreeing to maintain it. Any request for withdrawal must be submitted to the director of the EDD within 30 days of the acquisition date or within 30 days of notification from the director that the plan is to continue, whichever is later. There are then specific terms for how to manage the plan funds and claims in progress. It is recommended to work closely with the EDD to ensure these requirements are met.
Under a divestiture, claims must continue to be evaluated under the voluntary plan of the parent corporation, unless the divesting entity withdraws from it. After withdrawal, the parent corporation remains responsible for claims submitted before withdrawal, as well as for claims that began prior to the effective date of withdrawal. What does this mean for open and ongoing claims? Liability for the claim remains with the plan in effect at the commencement of the disability benefit period, which is the date that the voluntary disability insurance (VDI) or voluntary paid family leave (VPFL) began. Because disability claims can last until the claimant has received fifty-two times their weekly benefit rate, this means a claim could potentially remain with their original voluntary plan for up to a year.[iii]
State #2 and 3: New York and New Jersey
These two states can be discussed together because their provisions are similar. In both NY and NJ, the plan in place at the start of a claim will be responsible for benefit payment through the end of that claim.[iv] New Jersey does not have any specific provisions for acquisitions and defines an employer to include successors.[v] New York does and states an employer who becomes successor to a covered employer, or who acquires a covered employer, will immediately become a covered employer. Employers must notify their insurance carrier when they add new legal entities to their business operation to be covered under disability (DBL) and paid family leave (PFL) coverage.[vi]
Simply put: wherever the claim begins, there shall the claim remain. Perhaps that’s a bit formal, but it is true for all statutory states with private plan options.[vii] The plan in place at the start of the employee’s leave will be responsible for benefit payment through the end of that claim’s benefit year. Wherever that claim began, the claim will stay. This basic tenet of statutory paid family and medical leave plan management is a crucial principle to keep in mind, especially when dealing with any kind of corporate restructure or plan change.
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[i] C.R.S. 8-13.3-503(8)(b); ORS 657B.010(14)(b).
[ii] 12 NYCRR subpart 380-7.2(f), further clarified in NYS Paid Family Leave Arbitration 2023 Q1 Report.
[iii] Employers’ Guide to Voluntary Plan Procedures (DE 2040) Revision 5.
[iv] ); 12 NYCRR subpart 380-5.4(9)(i); N.J.A.C. 12:18-3.1(h).
[v] N.J.S.A. 43 :21-27.
[vi] 12 NYCRR subpart 380-7.2(f).
[vii] Employers’ Guide to Voluntary Plan Procedures (DE 2040) Revision 5; 7 CCR 1107-4.9.1; CTPL-009-PRVP(e); Switching between private plans and Paid Family and Medical Leave (PFML) | Mass.gov; N.J.A.C. 12:18-3.1(h); 12 NYCRR subpart 380-5.4(9)(i); OAR 471-070-2460(5); RCW 50A.30.055.
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