The New Massachusetts Paid Family Medical Leave Law – What Should Employers be Doing Now?
As of June 13, 2019, the implementation of the new Massachusetts paid family medical leave has officially been delayed by three months. This delay applies to the following items:
- Contributions and withholding – now scheduled to begin October 1, 2019;
- Employee notification – the new deadline is September 30, 2019;
- Exemption applications – now due by December 20, 2019;
- Issuance of final regulations – to be posted by June 17, 2019.
In addition, the contribution rate has been changed to account for the delay, to ensure adequate funding. Click here for more information.
Please feel free contact Leanne Scott or your BNN tax advisor with any questions at 800.244.7444. You can also learn more in our previously published tax alert, found below. Our state and local tax team is closely monitoring this issue and will continue to share updated information as it is available.
In June of 2018, Massachusetts became the seventh U.S. jurisdiction to enact paid family and medical leave (“PFML”). The Massachusetts Department of Family and Medical Leave (“DFML”) was formed to oversee the PFML program. Although benefits will not become available until the 2021 calendar year, payroll deductions to fund the program are currently scheduled to begin on July 1, 2019.
Under the PFML program, various types and durations of paid leave will become available to employees who need to take time off from work to care for family members. Employers may opt out of the program if they are providing benefits via a private plan that has been approved by the DFML.
What should employers be doing now?
At the outset, employers must notify their existing workforce of the new PFML law both in writing and by displaying a mandatory poster in the workplace. The poster must be available in English and also in each language that is the primary language of five or more individuals in the workplace, if such translations are made available by the DFML. The posters currently available can be found here.
On or before June 30, 2019, employers and other covered business entities must also provide written notice to their existing workforce regarding PFML benefits, contribution rates, protections, and other items. Each new hire must be notified within thirty days of beginning employment, in the employee’s primary language. Click here for more information.
Effective July 1, 2019, employers must begin making deductions from wages to fund contributions to the DFML. These rules apply to both private sector and state government employers; self-employed individuals and local governments may opt in.
Each employer must calculate the employer share versus the employee share of contributions. Employers are responsible for remitting the full contribution on behalf of all covered individuals. The term “covered individuals” includes all Massachusetts W-2 employees, as well as all Massachusetts 1099-MISC contractors if they make up more than fifty percent (50%) of the employer’s total workforce.
The maximum contribution is 0.63% of wages up to the annual Social Security maximum, which is $132,900 for 2019. Initially, this will be divided between family and medical leave as follows: 0.52% medical and 0.11% family. Apportionment will be determined annually based on projected benefit costs for the plan year. A calculator to estimate contributions is available here.
If an employer had twenty-five or more covered individuals during the last calendar year, then the employer must pay a share of the contribution. While employers with fewer than 25 covered individuals have no obligation to share financially in contributions, they remain responsible for remitting employee contributions to the DFML. The employer’s required share of contributions varies by type of leave, as follows:
- For medical leave, the employer contribution starts at sixty percent (60%), with the employee contributing forty percent (40%). An employer may choose to contribute more than 60%, reducing the employee contribution percentage accordingly.
- For family leave, the employee contributes one hundred percent (100%) and the employer is not required to contribute, but may choose to do so.
Contributions will be submitted on a quarterly basis via the Massachusetts Department of Revenue’s MassTaxConnect website. The first filing will be due October 31, 2019, covering July, August and September of 2019.
An employer may be eligible to receive an annual exemption from collecting, remitting, and paying contributions under the PFML if the benefits offered to its employees are equal to or greater than those provided by the PFML. Such benefits must meet all other minimum requirements, and must not cost employees more than they would be required to contribute to the PFML program. Exemptions must be submitted via MassTaxConnect and they will be reviewed and approved by the DFML. Click here for more information. The deadline to apply for an exemption for the first quarter to which the rules apply is currently September 20, 2019; previously, it was June 30, 2019.
The PFML law is still relatively new in Massachusetts. Service providers and employers must work together to determine how it will impact companies and their employees, paying particular attention to the following items at this time:
- Printing and displaying informational posters in the workplace.
- Providing required written notice to existing employees by June 30, 2019. Intake and orientation materials will also need to be updated to include notice for future new hires.
- Determining applicability of rules regarding contributions and calculating estimated contributions for all Massachusetts employees so that they are ready to withhold for pay periods beginning July 1, 2019. This will likely require consultation with current benefit providers, disability carriers (if applicable), and possibly employment attorneys or other advisors as careful attention must be paid to the interplay of the PFML rules with all existing (and contemplated) leave programs offered by an employer.
- Create an account and become familiar with MassTaxConnect, if you are not already, so that it will be possible to submit a private plan exemption request, if so desired, and also to be prepared to begin remitting contributions on a quarterly basis starting in September of 2019.
A helpful list of FAQs for employers can be found here. This page is updated by the DFML on a regular basis.
If you would like to discuss what needs to be done in the coming weeks and months, please contact Leanne Scott, or your preferred BNN advisor at 800.244.7444.
Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.