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Employer/Employee Funded PFML Goes Into Effect October 1, 2019

For some businesses, understanding, navigating and implementing PFML may require the assistance of a human resources consultant.

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Insights  <  Employer/Employee Funded PFML Goes Into Effect October 1

For some businesses, understanding, navigating and implementing PFML may require the assistance of a human resources consultant.

On the books since 2018, the Massachusetts “Grand Bargain Bill” includes Paid Family and Medical Leave (PFML) legislation, which applies to all employers and provides eligible employees with up to 20 weeks of paid medical leave and 12 weeks of paid family leave.

While covered employees will not be eligible for leave until January 1, 2021, the mechanism to fund this new benefit begins on October 1 – a little over two months from now. While this significant new law still has some lingering questions, the final draft regulations have recently been published.

In brief, PFML will be funded by a .75% wage tax, to be shared by employers and employees for businesses with 25 or more employees. Employers with fewer than 25 employees may require their employees to fund the entire .75 % tax. The funding contribution will apply to wages earned beginning October 1 with funds collected due with first quarter 2020 quarterly tax payments.

Employees applying for PFML will do so directly to the state. In turn, the state will manage the approval and coordination of benefits – much in the same way unemployment application and approval is processed. Those businesses that have not yet taken measures to comply with this new law cannot let any more time pass. The first step is to confirm with your payroll provider their ability to withhold employee contributions and the extent to which the provider will be involved in the process to remit quarterly contributions. The payroll provider must also set up an internal process to ensure compliance.

Businesses must also consider whether to contribute more than the required amount. Some may even choose to take things another step further by offering a private plan equal to or greater than the PFML benefit; however, an application for this exemption from PFML must first be submitted to and approved by the Department of Family and Medical Leave.

It is essential to develop a communication mechanism for all employees – and that includes 1099-MISC contractors. You are responsible for notifying everyone in writing about PFML benefits (the initial notification to covered employees and contractors is due no later than September 30) and a mandatory PFML poster that provides details of the legislation and informational links must be displayed in a central location.

For some businesses, understanding, navigating and implementing PFML may require the assistance of a human resources consultant. A professional can prepare an appropriate PFML communication plan, update company handbooks, and provide the overall guidance and support that a business needs as this new law goes into effect and further developments emerge.

 

Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statutes, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law. 

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