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Panel hears testimony on SB 1520; Employment Department says accounting fix avoids taxes or reduced benefits
Summary
In a public hearing on SB 1520, the Oregon Employment Department and supporters said an accounting system labeling employer and employee contributions will allow the state to comply with new IRS guidance without increasing costs or reducing benefits; the committee plans to work the bill on Wednesday.
The House Committee on Labor and Workforce Development held a public hearing on Senate Bill 1520 on Feb. 16, hearing agency witnesses and stakeholders about a narrowly drawn fix to comply with a recent Internal Revenue Service ruling that changes how paid-leave contributions and benefits are treated for federal tax purposes.
Andrew Stolfi, director of the Oregon Employment Department (OED), told the committee the IRS issued guidance earlier this year that could, without legislative or administrative action, require the program to implement payroll-tax withholding changes that would be costly and could shift tax burdens. He said implementing those changes as written would require extensive IT programming—"about $5,600,000"—and could impose roughly "$20,000,000 per year" in ongoing payroll-tax liability, potentially reducing claimants’ take-home benefits or shifting costs to Oregonians. Stolfi said SB 1520 is intended to protect the program, claimants and employers from those outcomes.
Senator Kathleen Taylor, the Senate sponsor, said the bill gives the Employment Department narrow authority to adopt rules establishing an accounting system to label contributions by source and to ensure employer-paid dollars are not used to fund medical-leave benefits. "That means nobody, not the state, nor businesses, nor the workers will have to pay a penny more," she said, urging support. Juan Serratos, the acting director for Paid Leave Oregon, described the approach: every dollar contributed would be labeled employer or employee and medical-leave benefits would be paid only from employee-labeled funds; he said current projections and trust reserves support the approach and that the changes can be done within existing budgeted resources.
Business groups and labor unions both spoke in favor. Paloma Sparks of Oregon Business and Industry said the approach avoids significant programming costs and new employer or employee tax burdens; Katie Tyson of the Oregon AFL-CIO said the system is working and SB 1520 is a cost-effective compliance strategy that preserves benefits. Committee members asked technical questions about costs and implementation. Chair Graber closed the hearing and said the committee intends to take up the bill in a work session on Wednesday.
The bill would not permit the director to change the statutory maximum contribution rate (1%) or the statutory 60/40 employee-employer split; it would permit rulemaking to set an accounting system and the department to adopt internal tracking and limited programming changes to ensure federal tax compliance.
