United States | Tax | New State Paid Family Leave Taxes for Employers and Employees in Maine and Minnesota

August 2, 2023

Employment Tax

United States | New State Paid Family Leave Taxes for Employers and Employees in Maine and Minnesota

Impact High

Summary

The states of Maine and Minnesota have both implemented paid family leave programs that will impose new responsibilities on employers in these states over the next few years.
In Maine, contributions to the Paid Family Leave fund are set to begin on January 1, 2025, with benefits to eligible Maine employees scheduled to begin on May 1, 2026.
In Minnesota, employers will be required to submit premium payments starting January 1, 2026, with benefits available to eligible Minnesota employees beginning on January 1, 2026. Reporting requirements for Minnesota employers will begin in July of 2024, and the requirement to notify employees of the Paid Family and Medical Leave program will start in late-2025. Specific dates for such reporting and notification requirements are not yet available.

Overview

Maine – Paid Family and Medical Leave Program (PFML):

PFML is a program funded by employee and employer contributions (where applicable), up to the social security wage base in effect for the year. Contributions to the PFML program are set to begin on January 1, 2025. The Maine Department of Labor will begin the rulemaking process in January of 2024, with the initial rules necessary for implementation of the PFML program to be adopted by the Maine Department of Labor by January 1, 2025.

Highlights:

• Beginning January 1, 2025, employer contribution reports and premiums will be due on a quarterly basis.
• The Department will set the premium amount for each year; beginning January 1, 2025, the premium amount may not be more than a combined rate of 1.0% of wages.
• Employers with 15 or more employees may deduct up to 50% of the premium required for an employee from that employee’s wages and remit 100% of the combined premium contribution required to the fund.
• Employers with fewer than 15 employees may deduct up to 50% of the premium required for an employee from that employee’s wages and remit 50% of the premium required to the fund.
• Employers may apply for approval to meet its obligations under the PFML program through a private plan.
• Covered workers will be eligible for up to 12 weeks of paid time off per benefit year for family and medical reasons including illness, to care for a relative, or the birth of a child.

Minnesota- Paid Family and Medical Leave (PFML):

PFML in Minnesota is paid for by employers and employees at 0.7% of an employee’s taxable wages, which is the social security wage base in effect for the year. Employers may charge a maximum of half of the premium (0.35%) to their employees through a wage deduction. Premium rates may be adjusted annually, not to exceed 1.2 percent of each employee’s gross wages. Premium payments and benefits are set to begin January 1, 2026.

Highlights:

➢ Quarterly wage detail reports will be required by most Minnesota employers starting July 1, 2025. This report will detail the quarterly wages received and hours worked for each employee.
➢ Premiums will be due on a quarterly basis, on or before the last day of the month following the end of the calendar quarter.
➢ The PMFL program will have its own employer account system whether the employer will submit wage detail reports and make premium payments.
➢ Employers with less than 30 employees may exclude a portion of the wages upon which the quarterly employer premium is required, thereby reducing the amount of employer premiums due. The reduction in premiums is for the sole benefit of the employer and does not relieve the employer from deducting the employee portion of the premium.
➢ Employers may apply for approval to meet its obligations under the PFML program through a private plan.
➢ Covered employees are eligible to take up to 12 weeks of medical leave or family leave for a single qualifying event, or up to 20 weeks of combined medical and family leave if the employee has more than one qualifying event in the same year.

How we can help

Vialto can assist you in complying with your responsibilities related to state paid leave programs, including determining which employees are covered under the program, assisting with any required registrations, calculating employee and employer contribution amounts, drafting employee communications, and assisting with wage reporting.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

• Tina Schrob, Partner | cristina.g.schrob@vialto.com
• Greg Fetter, Partner | gregory.fetter@vialto.com
• Ligeia Donis, Partner | ligeia.m.donis@vialto.com
• Priya Schwartzburt, Director | priya.c.schwartzburt@vialto.com

Further information on Vialto Partners can be found here: www.vialtopartners.com

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