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Massachusetts Paid Family and Medical Leave: An Overview

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We’ve already written about New York and Washington, and DC has a law that went into effect recently. Now, another state is throwing itself into the enhanced paid family leave discussion: Massachusetts. That doesn’t mean you shouldn’t keep your eye out for your own state’s laws - many have proposed regulations in the works as well.

While this particular state’s law doesn’t go into effect until 2021, a new tax will be imposed starting July 1, 2019.

Here are some things to know now to get prepared.

Who must comply?

According to Mass.gov, if you employ Massachusetts workers, you must comply with the PFML law. It includes: nonprofits, religious institutions, and colleges and universities employing students.

Exempt unless opting in: Cities, towns, districts, and political subdivisions or their instrumentalities.

The details.

All Massachusetts employers will be required to provide employees (and sometimes contractors) paid leave for family and medical related absences. Titled, the Massachusetts Paid Family and Medical Leave (PFML), compensation during leaves of absence will be paid by the state. That is, unless an employer otherwise privately insures the cost through an approved plan.

If you’re already providing a paid leave benefit to your employees, Mass.gov explains that you may be eligible for an exemption from collecting, remitting, and paying contributions under PFML.

The catch is that the benefits offered to your employees by your approved private plan must be greater than or equal to the benefits provided by the PFML.

What if your business has multiple locations or companies? The department will establish accounts by tax identification number, workforce counts, contributions owed, and other requirements. Therefore, the PFML law is based on tax ID numbers.

Does your business use 1099-MISC contractors? If more than half of your workforce is comprised of these workers, you must treat them as employees covered under the PFML.

Funding.

To gather the funds necessary to compensate leaves, Massachusetts will impose a new payroll tax beginning July 1, 2019. These payroll taxes must be remitted quarterly, through MassTaxConnect.

If you’re a PrimePay payroll and tax client, we’ll handle this for you.

The initial tax rate is 0.63% (to be adjusted annually) of compensation up to the Social Security wage base for each employee and covered individual.

According to JD Supra, the most an employer with over 25 employees can deduct from an employee’s wages for the 0.63% tax is 0.32% of pay up to the Social Security wage base. The employer would then be responsible for the remaining 0.31% tax, up to each employee and covered individual’s Social Security wage base.

If your workforce consists of 25 or less employees, you may deduct the entire PFML withholding tax from employees’ compensation, up to the Social Security wage base.

New employers should made a good faith estimate as to what you expect your payroll to look like over the next year to determine workforce count.

For more information on this new regulation, please visit Mass.gov.

Disclaimer: Please note that this is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.