The Massachusetts Department of Family and Medical Leave has refined various administrative aspects of the program over the last few months by delaying the effective date, increasing the tax withholding amount, and now, changing the bonding requirements. The following is a brief overview of current, updated features.
When does tax withholding for the Massachusetts Paid Family and Medical Leave (“PFML”) begin? Beginning October 1, 2019, Massachusetts employers that do not have an exemption from the tax, must begin payroll withholdings (or otherwise make payments to Massachusetts) under the PFML. How much is the tax withholding for employers with 25 or more covered individuals? An employer with 25 or more eligible individuals must remit an effective rate of 0.75% of wages up to the individual’s Social Security Wage Base (i.e. for 2019, $132,900). Of this amount, 0.62% applies to medical leave, and 0.13% is for family leave. Employers with 25 or more covered individuals must pick up at least 60% of the medical leave contribution or 0.372% of eligible wages up to the Social Security Wage Base. Instead of withholding from wages, an employer may elect to make contributions of the tax rate on behalf of covered individuals.. How much is the tax withholding for employers with under 25 covered individuals? An employer with fewer than 25 eligible individuals must remit an effective rate of 0.378% of wages up to the individual’s Social Security Wage Base (i.e. for 2019, $132,900). Of this amount, 0.248% applies to medical leave, and 0.13% applies to family leave. Very small employers are not required to contribute, although the employer may choose to do so instead of withholding from wages. How can an employer exempt itself from the tax obligations? An employer may apply for an exemption from the PFML tax by applying with the Department. To do so, the employer must present a private plan that provides the same or better benefits as what the law provides, and meet a bonding requirement to assure payment of the benefits for its qualified workforce. The law requires employers with private paid leave plans to provide Massachusetts a bond guaranteeing that such plans will pay adequate leave benefits for eligible individuals. On September 9, 2019, the Department issued new bond requirements, which, for most employers with a private plan, reduce the cost of a bond. Under the new requirements, bonds are calculated based on the applicable tax rate (0.13% for family leave, 0.62% for medical leave, and 0.75% for both), times the statewide average weekly wage ($1,383.41), times the number of covered individuals, times 52. Thus, an employer with 1000 employees under an exempt private plan that covers both family and medical leave would have to get a bond value of $539,529.90 (0.75% x $1,383.41 x 1,000 x 52). An employer with 100 employees under an exempt private plan that covers medical leave only would have to get a bond value of $44,601.14 (0.62% x $1,383.41 x 100 x 52). An employer with 50 employees under an exempt private plan that covers family leave only would have to get a bond value of $4,675.93 (0.13% x $1,383.41 x 50 x 52). When are applications for tax exemption due? Applications for a one-year tax exemption from October 1, 2019 through September 30, 2020 are due by December 20, 2019. An exempt plan that is approved after October 1, 2019 will be effective as of October 1, 2019. For how long is a tax exemption good? A tax exempt private plan providing paid family and/or medical leave benefits is good for only a year. Exemptions for private plans, and bonds must be applied for annually. What are the new bond requirements for exempt plans? The law requires employers with private paid leave plans to provide Massachusetts a bond guaranteeing that such plans will pay adequate leave benefits for eligible individuals. On September 9, 2019, the Department issued new bond requirements, which, for most employers with a private plan, reduce the cost of a bond. Under the new requirements, bonds are calculated based on the applicable tax rate (0.13% for family leave, 0.62% for medical leave, and 0.75% for both), times the statewide average weekly wage ($1,383.41), times the number of covered individuals, times 52. Thus, an employer with 1000 employees under an exempt private plan that covers both family and medical leave would have to get a bond value of $539,529.90 (0.75% x $1,383.41 x 1,000 x 52). An employer with 100 employees under an exempt private plan that covers medical leave only would have to get a bond value of $44,601.14 (0.62% x $1,383.41 x 100 x 52). An employer with 50 employees under an exempt private plan that covers family leave only would have to get a bond value of $4,675.93 (0.13% x $1,383.41 x 50 x 52).receive news & alerts
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