Businesses who choose employer-administered equivalent plans must provide proof of solvency.
An employer-administered equivalent plan is when the employer assumes all financial risk associated with paying benefits and administering its equivalent plan, even if a third-party administers the plan. Learn more about equivalent plans on our website and in the administrative rule.
What is proof of solvency?
Proof of solvency means showing your organization has enough funds or resources to cover the Paid Leave Oregon total contribution rate (for both the employer and employee) for the upcoming three calendar quarters, regardless of employer size. The calendar quarters are the three-month time periods ending March 31, June 30, September 30, or December 31. You can identify which calendar quarter you are in, based on the current calendar date. Here is the 2024 Calendar.
How do I prove solvency?
You can prove solvency by providing one of the following:
- Documentation, like a bank statement, that shows you have enough assets
- A bond
- An irrevocable letter of credit (official correspondence guaranteeing payment) issued by an insured institution. The bond or letter of credit must name the Oregon Employment Department (OED) as the payee or beneficiary.
Attach this documentation with your equivalent plan application when you send it through Frances Online or mail it with your paper application to OED. More information about Frances Online can be found here.
How much funds do I need to prove solvency?
Employers need to show they have funds equal to the Paid Leave Oregon contribution rate for three calendar quarters. Employers can do this in three steps.
Estimate the total wages for each of the three upcoming calendar quarters and add them together.
Multiply that sum by 1%, which is the current Paid Leave Oregon contribution rate, which is set yearly. This gives you the amount you must prove you can cover.
Once you have the estimated amount, provide proof of solvency for that amount when you send your application for an employer-administered equivalent plan using one of the methods above.
Here is an example of how you can estimate the amount of funding you need for your proof of solvency when applying for an employer-administered equivalent plan.
You estimate your total Paid Leave Oregon subject wages (See Oregon Revised Statute 657B) for the upcoming three calendar quarters is $750,000
Quarter 1 = $200,000
Quarter 2 = $300,000
Quarter 3 = $250,000
$200,000 + $300,000 + $250,000 = $750,000
Multiply $750,000 by 1% to get $7,500.
$750,000 × 1% (.01) = $7500
Attach an irrevocable letter of credit from your bank for $7,500 to your equivalent plan application.
How will the Employment Department validate my solvency?
When reviewing your application, OED will use your past payroll reports to validate your estimated contribution amounts. If your past payroll reports are different, OED may request additional documentation to confirm your estimated contribution amounts.