Solvency Guide

Businesses who choose employer-administered equivalent plans are required to 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 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 2023 Calendar.

How do I prove solvency?

You can prove solvency by:

  • Providing documentation, like a bank statement, that shows you have enough assets;
  • Providing a bond; or 
  • Providing an irrevocable letter of credit (official correspondence guaranteeing payment) issued by an insured institution. The letter of credit must name the Oregon Employment Department (OED) as the payee or beneficiary. 

Attach this documentation with your equivalent plan application submitted through Frances Online or mailed with a paper application to the Oregon Employment Department. 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. 

  1. Estimate the total wages for each of the three upcoming calendar quarters. 

  2. Multiply that amount total by 1%, which is the 2023 Paid Leave Oregon contribution rate. (Note: The contribution rate is set yearly.) This gives you the amount you must prove you can cover. 

  3. Once you have the estimated amount, provide proof of solvency for that amount when you submit 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.

  1. The employer estimates its total Paid Leave Oregon subject wages (See Oregon Revised Statute 657B) for the upcoming three calendar quarters is $750,000 ($200,000 the first quarter, $300,000 the second quarter, and $250,000 for the third quarter). 

  2. The employer multiplies $750,000 by 1% to get the amount of $7,500.  

  3. The employer attaches an irrevocable letter of credit from its bank for $7,500 to its equivalent plan application.

Quarter #1 wages
Quarter #2 wages
Quarter #3 wages
Total wages
Contribution rate 1%
      X .01
Solvency Amount

How will the Employment Department validate my solvency? 

When reviewing your application, the Oregon Employment Department 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.

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