You’ve been hearing about the Paid Family and Medical Leave (PFML) law for more than a year. Now, as the first PFML deadline approaches, some Massachusetts employers are scrambling to get ready. There’s still time to get everything in order before the program officially begins, but it’s running short.
A PFML Overview
The enactment of PFML, administered by the Department of Family and Medical Leave, makes it possible for eligible Massachusetts employees to take time off work to bond with their new babies, care for sick relatives and tend to their own serious medical conditions. PFML benefits allow employees to take up to 20 weeks of paid medical leave and 12 weeks of paid family leave per year (or 26 weeks to care for a family member who is hurt while on active duty).
PFML benefits are funded by employee and/or employer contributions. The contribution rate is 0.63% of an employee’s maximum taxable earnings, as set by the Social Security Administration. For 2019, that maximum is $132,900. Any earnings exceeding that amount won’t be subject to PFML contributions. (How each employee’s total 0.63% contribution is split between funding family leave and medical leave will vary from year to year, depending on projected costs.)
Massachusetts employees can’t access these benefits until January 1, 2021 – but employers have to take action soon. Has your business taken the necessary steps to comply with the law?
Steps Your Business Needs to Take
- Verify Exemption Status If your business already offers a paid leave benefit, you could be eligible for an exemption from paying into PFML. To get an exemption, a business must offer benefits that are a) equal to or greater than the benefits provided by PFML and b) don’t cost the employees more than they would be required to contribute to PFML. Apply for an exemption through MassTaxConnect before September 20th to be exempt from paying first-quarter contributions.
- Notify Employees All Massachusetts employers are required to inform their workforces about PFML. Your business must display the PFML information poster in a visible location. (Download the poster and print it on a standard sheet of paper.) You’re also required to give all your employees written notice of their PFML benefits. W2 employees and independent contractors have to be given slightly different information, so any business that uses both employees and contractors should create two notices. The DFML provides templates for these notification letters. Notification must be made by June 30, 2019. Employers must also try to get employees to provide written acknowledgment that they’ve received PFML information.
- Verify Contribution Requirements The makeup of your workforce affects how your business will make its PFML contributions.
– If your business has more than 25 employees in Massachusetts, you can deduct up to 40% of each employee’s required medical leave contribution and up to 100% of each employee’s family leave contribution from the employee’s pay.
– If you have fewer than 25 employees in Massachusetts, your business doesn’t have to pay any employer contribution to PFML but does have to remit your workers’ contributions; essentially, you’re just in charge of collecting their contributions.
– If more than 50% of your workforce are independent contractors, they’re considered “covered individuals.” You must remit contributions for them as well as your W2 employees.
– If you use independent contractors but they make up less than 50% of your workforce, your business isn’t required to remit contributions for them. Independent contractors have the option to pay into PFML and get coverage, but they aren’t obligated to participate.
- Set Employee Deductions If your business does have more than 25 employees in Massachusetts, a decision must be made about how to apportion employee contributions. Again, you’re entitled to deduct up to 40% of medical leave and 100% of family leave contributions from an employee’s pay, to cover the employee’s share. Employers may also cover the entire PFML contribution for their employees, rather than making them contribute. Clarify how you’re going to handle employee contributions before sending out employee notifications, as these letters should spell out what your business plans to cover vs. what the employee is responsible for.
- Prepare to Remit Massachusetts employers are required to start deducting PFML contributions starting on July 1st. First-quarter payments are due by October 31st and can be paid through MassTaxConnect. Your payroll system should be set up to make the necessary deductions before July 1st.