Colorado’s Family and Medical Leave Insurance program will take on two smaller, but still consequential, changes in 2026 — one less than was expected as recently as the middle of last week — of which employers should be aware.

First, a law passed during the 2025 legislative session will double the 12 weeks of potential paid leave that a new parent can take if their child is receiving inpatient care in a neonatal intensive care unit.

Second, the fee that Colorado employers must pay to sustain the program — or can split with their employees — will dip slightly from 0.9% of each worker’s paycheck to 0.88%.

Up until last week, it looked like many employers also would have to start covering their portion of Social Security and FICA/Medicare taxes on certain FAMLI medical-leave benefits because of an Internal Revenue Service rule change. However, the IRS late last week granted Colorado and other states with similar programs a one-year extension to implement the new federal tax withholding and reporting requirements.

WHAT BUSINESSES NEED TO KNOW

The two changes that are going into effect aren’t expected to have huge impacts on employers. The fee decrease will save businesses paying into the insurance program a cumulative $35 million annually, although the change will barely be noticeable in most employees’ paychecks. And the NICU extended-leave allowance is expected to be used by very few new parents in any given year.

However, it’s still important that employers prepare internally for the application of the new extended-leave allowance in particular, said David Gartenberg, Denver office managing shareholder for the Littler law firm.

Employers will need to tweak their employee handbooks to include the new allowance, put up a new FAMLI poster with the updated information and include the rule in paperwork distributed to new employees, he said. And for the smallest companies in particular, they should plan ahead as to how they will deal with the absence of one of their workers not for just 12 weeks but 24 — and an extra four weeks on top of that if the parent has serious health conditions following childbirth.

“Twenty-four weeks is a long time. That’s almost half the year,” Gartenberg said, noting that employers also must reinstate workers in their jobs or in similar positions when they return from leave, as long as they worked there for 180 days before taking leave. “This expansion to FAMLI will, I believe, provide the largest bank of job-protected leave in the country.”

EXPANDED MEDICAL LEAVE FOR NICU STAYS

The expansion comes courtesy of Senate Bill 144, which was cosponsored by Sen. Jeff Bridges, a Greenwood Village Democrat whose son ended up in the NICU dealing with serious health concerns immediately after his birth. Bridges said that he saw firsthand how terrifying the experience could be and didn’t want new parents to have to choose between keeping their jobs or being with their infants.

“It is so important for a child’s development to be with their parents in those first few months of life,” Bridges said in a news release after Gov. Jared Polis signed the bill. “We need to make it easier for parents with kids in the NICU to have access to that quality time.”

The FAMLI program, approved by voters in the 2020 general election, launched fully in 2024. It allows workers to take as much as 12 weeks of partially paid leave to welcome newborns, deal with their own or a family member’s illness, escape domestic violence or care for their family when a military spouse is called for duty outside of the state.

In its first year, the state received 174,000 claims for medical leave, averaging eight weeks, and dispensed $618 million in benefits to workers at the 96% of Colorado companies participating through the state-run program, program director Tracy Marshall said. The other 4% of employers have state-approved private plans to handle the claims.

CHANGE IN FAMLI FEES

Legislative and business-community opponents cautioned as creation of the program was being debated that the estimates for anticipated claims could be low, which could lead the 0.9% fees assessed on each worker to have to rise to as much as 1.2%. Employers can ask workers to pay no more than half of that cost, and companies with fewer than 10 employees do not have to pay the employer’s share of the fees.

And indeed, the number of monthly claimants rose from 9,348 in January 2024 to a high of 31,180 in August 2025 before starting a downward trend, according to state figures. But the average payment dropped from $926 per week in that first month to $495 in June of this year, and the first-year payments still came in below those predicted by actuarial studies, Colorado Department of Labor and Employment Executive Director Joe Barela said.

With that stability, the per-paycheck fees are dropping slightly come Jan. 1, a move that Marshall said reflects the strong economic footing of the fund. Meanwhile, because average weekly wages for employees statewide rose during the fiscal year that ended on June 30, the weekly maximum benefits through the program increased to $1,381.45.

The stability doesn’t mean employers haven’t struggled with a rush of workers seeking benefits that far outpaces the expectations after 33 years in which workers at companies of at least 50 employees have already been able to take 12 weeks of unpaid leave.

One employer at a medium-sized company, who asked to remain anonymous, noted that after a combined 14 workers took federally sponsored family leave in 2022 and 2023, 38 took it in 2024, accounting for $186,000 in gross wages paid.

SOME EMPLOYERS STRUGGLE WITH REQUESTS FOR MEDICAL LEAVE

And in a March presentation to city leaders about staffing problems that led to slowing responses to 911 calls, the Denver Department of Public Safety cited a 334% increase in overall leave usage in 2024 after FAMLI launched,  according to published media reports.

Still, even if the change in per-employee fees is a small one, it is one that can be appreciated by employers — and gives an indication that the FAMLI program is being run correctly as far as its finances go, Gartenberg said.

“I don’t think it’s going to feel that much different for employers and employees,” he said. “But it means the program is solvent.”

Employers may feel the federal rule change in 2027, when any company with 10 or more workers will be required to pay Social Security and FICA taxes for their portion of FAMLI benefits because the IRS will begin treating them as “third-party sick pay,” which is taxable. That means if a worker is paid $2,000 for leave, employers who cover 50% of benefits would be required to pay taxes on $1,000 of that total, explained Ian McKenzie, FAMLI program communications manager, during a recent talk to the West Metro Chamber of Commerce.

The rule change has irked both employers and legislators. Senate Majority Leader Robert Rodriguez, D-Denver, told the Colorado Chamber of Commerce board of directors during a December meeting that Senate Democrats may introduce a bill in 2026 that would ask the state program to cover that expense.

Ed Sealover authors Sum & Substance, a news site of the Colorado Chamber of Commerce. To read more, please visit tsscolorado.com.