Under the Paid Family and Medical Leave (PFML) law, most Massachusetts employers must send contributions to the Department of Family and Medical Leave. Your organization’s contributions depend on how many of your employees and contractors are covered under the PFML law. Employers must withhold PFML contributions from employees’ paychecks. Employers are only required to send an employer contribution if they have 25 or more covered individuals in their workforce.
Individual contributions are capped by the Social Security taxable maximum.
If you have a private or self-insured plan that is paying benefits to your employees that is the same or equal to PFML and are approved for an exemption, you do not have to make PFML contributions on those benefits.
Taxes on the private or self-insured plan benefits are a separate topic; we suggest consulting a tax professional.
What earnings are eligible for PFML withholding?
The PFML law follows the unemployment statute, section 1 of M.G.L. c. 151A, for determining what counts as wages. This means that you should base your contributions on the same wage base you report to the Department of Unemployment Assistance. Wages include:
- Salaries, hourly pay, and stipends
- Cash tips of more than $20 and non-cash tips
- Commissions and bonuses
- Overtime, vacation, or sick pay
- 401K employer contributions
This list is not exhaustive. Because of the wide range of ways that companies compensate their employees, it is not possible to list every potential form of income that would qualify as wages.
For example, if you work for a fishing vessel that weighs 10 net tons or more, and you receive a W-2, then your wages (and any Form 1099-MISC payments) are subject to PFML contributions. If you work on a vessel that weighs fewer than 10 net tons, your wages are excluded from PFML.
For more information about how different industries' wages are defined and what types of earnings qualify as wages, refer to the unemployment statute.
Employers must send contributions on behalf of their tipped employees, even where net wages aren't enough to cover the employee’s contribution. It is up to employers to determine how to recover the employee’s portion from the employee.
Wages that count if certain conditions apply
Certain types of compensation or payments made to employees count as wages if certain conditions apply.
Severance payments are subject to PFML contributions as long as the employee has not signed a release of claims against the employer at the time of separation, or if the severance is in relation to a plant closing.
A release of claims is a settlement agreement where an employee agrees not to pursue civil action against their former employer.
A plant closing, according to Massachusetts law, is an end to or reduction of business at a facility with at least 50 employees, and which results in the permanent separation of at least 50% of employees at that facility.
Cash tips are subject to PFML contributions if an employee reports $20 or more in tips in a calendar month.
Employers must send the full contribution on behalf of their tipped employees, even where net wages aren't enough to cover the employee’s contribution. It is up to the employer to determine whether and how to recover the employee’s portion from the employee.
Third party sick pay and disability payments
Third party sick pay and disability payments are subject to PFML contributions as long as they are not:
- Workers’ compensation insurance payments
- Medical or hospitalization expenses in connection with sickness or accident disability
- Death benefits
- Paid 6 months or more after the employee last worked for the employer
Wages that are exempt from PFML contributions
Some retirement plans and cafeteria plans
Payments to or from some retirement plans, such as 403(a) and 403(b) plans, are not subject to PFML contributions.
Employer payments to a cafeteria plan (such as dependent care assistance or a health savings account) are not subject to PFML contributions as long as they are used to fund benefits that are exempted from wages (see section 1(s) of M.G.L. c. 151A for more information). Employee payments to a cafeteria plan are subject to PFML contributions if they are part of an employee’s salary. Cash distributions from cafeteria plans are subject to PFML contributions.
Unused sick or vacation pay
Compensation paid for unused sick or vacation hours at the time of separation of employment is not subject to PFML contributions.
Reporting wages subject to PFML contributions
How to report PFML contributions on W-2 and 1099-MISC tax forms
Employers should report year-end PFML contributions on Box 14 for W-2s and Box 16 for 1099-MISC. In both cases, the boxes should be labeled “MAPFML.” The amounts in the Boxes should include the combined total for Family and Medical Leave.
The amounts in Box 14 (on the W-2) and Box 16 (on the 1099-MISC) reflect the employee's year-end PFML contributions, not the employer’s. Contributions are calculated based on the eligible wages that an employee earned up to the Social Security income limit. See above for which wages count as eligible, or for more detail, see M.G.L. c. 151A. Employers must send contributions for each employee each quarter.
Resolving 1099-MISC overpayments
In some cases, employers of 1099-MISC employees may base contributions on gross earnings. This might lead to overpayment.
Employees can correct this on the Massachusetts personal income tax form. The instructions for the Massachusetts Form 1 and Form 1-NR/explain how to make this adjustment and recalculation for any overpayment.
Note that if you are self-employed and have opted into PFML, you should make contributions based on your net earnings.
IRS guidance on tax treatment of PFML contributions
The IRS has not yet issued official guidance for how employers should handle PFML contributions. We anticipate that the IRS will conclude that employee contributions should be withheld from after-tax wages. However, until official guidance has been issued, we urge you to consult a tax advisor with any questions you might have.
Department of Family and Medical Leave - Hours of operation: Monday-Friday, 8 a.m. - 5 p.m.
Department of Family and Medical Leave - Hours of operation: Monday-Friday, 8 a.m - 5 p.m.
Department of Revenue - Hours of operation: Monday-Friday, 8:30 a.m. - 4:30 p.m.
|Last updated:||December 17, 2021|