CRITICAL UPDATE: State officials on Tuesday agreed to a three-month delay before assessing companies fees for a new paid family and medical leave program. These new taxes were supposed to kick in on July 1. Now, they’ll begin in October. The news came via a brief joint statement issued Tuesday night from Beacon Hill’s three leaders. The postponement should give businesses adequate time to implement the program, and that some minor changes will be made to its design. The Legislature still needs to vote to adopt the delay. Source: Boston Globe
With paid leave a hot topic for employers, Massachusetts is following suit with the implementation of Massachusetts Paid Family and Medical Leave (MAPFML). MAPFML requires employers with employees in Massachusetts to provide MA employees with paid family and medical leave benefits, as outlined below.
Covered Employers: Any employer with employees in Massachusetts.
Covered Employees: W2 employees including full-time, part-time, seasonal, and temporary employees, union employees, and 1099-MISC contractors if they make up more than 50% of your total workforce, are all covered under this law. This includes remote employees who live in Massachusetts, even if their work is not directed or controlled in Massachusetts.
Note regarding temporary staffing employees: staffing employees are to be counted as covered individuals by the staffing company, not by the employer using the staffing agency.
Notice Requirements: Employers must provide the following notice requirements on or before June 30, 2019:
- Workplace poster placed in a location where it can be easily read
- Written Notice to current employees and contractors who will be eligible for MAPFML of PFML benefits, contribution rates, and other provisions. The notice may be provided electronically with a receipt of acknowledgement. If an employee fails to acknowledge receipt, the employer will still be considered as having fulfilled its notice requirement if it can show that employees had the opportunity to acknowledge it. The Department of Family and Medical Leave (DFML) has provided a template notice that employers may use.
- Written notice must also be provided to all new hires within their first 30 days of employment. The distribution requirements remain the same as above.
Paid Family Leave: Beginning in 2021, employees in Massachusetts will be able to take paid family leave to:
- Care for a family member with a serious health condition
- Bond with a child within the first 12 months after birth
- Bond with a child within the first 12 months of adoption or foster care placement
- Manage family affairs when a family member is on active duty in the armed forces
Paid Medical Leave: Beginning in 2021, employees in Massachusetts will be able to take paid medical leave if they are unable to work due to their own serious medical condition.
Benefits and Timelines: To receive paid medical leave benefits, an individual must have earned at least $4,700 in the preceding 12 months and have approximately 15 weeks or more of earnings. The employee does not have to have worked for the employer for 12 months; they only need to meet the eligibility criteria. The weekly benefit is calculated as a percentage of earnings, with a weekly maximum benefit of up to $850 per week.
Massachusetts Paid Family and Medical Leave provides up to 12 weeks of paid family leave, 20 weeks of paid medical leave, or a combination of up to 26 weeks of leave within a 12-month period.
Beginning January 1, 2021, paid family leave benefits will be available for employees who request leave to bond with a new child or to address the needs of a family member who is a covered service member of the armed forces. At this time, paid medical leave benefits will also be available to workers who request leave as a result of their own serious health condition.
Beginning July 1, 2021, paid family leave benefits will also be available for employees needing to take leave to care of a family member with a serious health condition.
As with FMLA, employees will be responsible for continuing to pay for their benefits on the employee level, while the employer will remain responsible for making the employer contribution.
Massachusetts Paid Family and Medical Leave benefits will not be reduced by any short-term disability benefit that an employer offers unless the aggregate benefit amount would exceed the employee’s average weekly wage. However, employers will want to defer to their short-term disability plan to confirm if those benefits will be offset by the state benefits.
Additionally, employees may choose to use accrued, paid leave instead of applying for MAPFML. Employees also may not receive MAPFML benefits for the period that they are also receiving compensation due to the use of accrued paid leave.
In an era where employers are starting to implement paid parental leave policies, it is currently unclear if employers could put a parental leave program in place that would allow for them to gross up and employee’s leave pay to 100% after the employee applies for MAPFML.
Contributions: Employers should begin collecting contributions on July 1, 2019.
The exact amount that will be remitted depends on the total makeup of the employer’s Massachusetts workforce, including both Massachusetts W2 employees and 1099-MISC contractors, total wages for Massachusetts W2 employees in the previous calendar year, and total payments made to Massachusetts 1099-MISC in the previous calendar year. To get an idea of contributions, employers can use the MA provided estimate calculator.
The contribution rate is 0.63% of the first $132,900 of an individual’s individual annual earnings. That is split into the public Trust Fund, with 0.52% going towards medical leave and 0.11% towards family leave.
Employers with 25 or more covered individuals are required to pay of an employer share of 60% of the 0.52% that is being paid towards the medical leave portion of the PFML Trust Fund.
Employers with fewer than 25 covered individuals must submit contributions on behalf of their workers, however, they are not required to pay the employer share. For those with 25 or more covered employees, up to 100% of the family leave contribution may be deducted from employee wages, while up to 40% of the medical leave contribution may be deducted from employee wages and the employer is responsible for contributions the remaining 60%.
The breakdown of the total contribution percentage for an employer with 25 or more covered employees in Massachusetts is as follows (employers with fewer than 25 covered employees would not be responsible for the employer short under the medical leave section):
*As shown here on May 22, 2019
Remitting Premiums: Employers will be required to file quarterly reports beginning in October 2019 for July- September of 2019. Exactly information that these reports will contain has not yet been released. For now, employers should plan on including the following information for their MA employees: Name, Social Security Number, and wages paid.
Private Plan Exemptions: Employers who already provide a paid leave benefits may apply for an exemption from the state’s PFML law. For a private plan to be approved, it must have the same eligibility requirements and provide great or equal benefits provided by PFML. Employers have until September 20, 2019 to file for a private plan exemption for the first quarter contributions. Employers wishing to apply for the exemption can find out more information on the Massachusetts Exemptions from Paid Family and Medical Leave for private plans page.
Next Steps: Employers need to evaluate whether they have any employees in Massachusetts subject to the Paid Family and Medical Leave Law. If so, they should begin notifying their applicable workforce of the benefits that will be available under the Paid Family and Medical Leave law. Time is of the essence, so employers should confirm with their payroll vendor that they are prepared to begin taking deductions under the law as of July 1, 2019. Lastly, if an employer wishes to apply for a private plan exemption, employers should begin that process immediately.
We will continue to monitor the reporting requirements as they are released. Have questions? We have answers! Reach out to RMI experts for assistance.
Information contained herein is not intended to constitute tax or legal advice and should not be used for purposes of evading or avoiding otherwise applicable regulatory responsibilities as issued by the federal or state government(s) and/or taxes owed under the Internal Revenue Code. You are encouraged to seek advice from your legal or tax advisor based on your circumstances.