Wages subject to Paid Family and Medical Leave (PFML) contributions

Know which types of wages and payments apply to your workforce's family and medical leave contributions.

Table of Contents

Overview

Under the Paid Family and Medical Leave (PFML) law, most Massachusetts employers are responsible for remitting family and medical leave contributions to the Department of Family and Medical Leave on behalf of their covered individuals. This can include W-2 employees and, in some cases, 1099-MISC contractors. These contributions may be covered by withholding from eligible wages. Generally, the PFML law follows the guidance of the Commonwealth's unemployment statute to determine wage eligibility as explained below. 

Common examples of W-2 wages subject to PFML contributions

For the most part, the PFML law follows the unemployment statute (M.G.L. c. 151A) for determining what constitutes wages. This means that contributions should be based on the same wage base you report to the Department of Unemployment Assistance. 

Generally, the following are considered wages: 

  • Salaries, hourly pay, non-cash tips, and stipends 
  • Commissions and bonuses 
  • Overtime, vacation, or sick pay 
  • 401K employer contributions 
  • Tips 
  • Employers must remit 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. 

For a full definition of wages, please refer to section 1 of M.G.L. c. 151A. 

Additional Resources

Common examples of payments to 1099-MISC contractors subject to PFML contributions

Payments made to individuals or sole proprietorships are subject if you're required to issue an IRS form 1099-MISC and they qualify as covered individuals under the PFML law

Generally, these payments include: 

  • Other income (Box 3): Depending on the nature of the payment, this category may be subject to contributions 
  • Medical and healthcare payments (Box 6) 
  • Nonemployee compensation (Box 7) 
  • Crop insurance proceeds (Box 10)  
  • Excess golden parachute payments (Box 13) 

Note that only services provided that would otherwise require the issuance of a 1099-MISC are subject to contributions. For a full description of when a 1099-MISC is required, please refer to the IRS guidance on reporting payments to independent contractors

Other wages that are subject to PFML contributions

Severance pay 

Severance payments are wages subject to PFML contributions as long as the worker wasn’t required to sign 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, in exchange for cash payments, a former employee agrees not to pursue any civil actions against their former employer. A plant closing is the permanent ending to or reduction of business at a facility of at least fifty employees, which results in the permanent separation of at least fifty percent of the employees at the facility or facilities.  

Please see section 1(r) of M.G.L. c. 151A for more information. 

Third party sick pay and disability payments 

Third party sick pay and disability payments are wages 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 six months or more after the employee last worked for the employer 

Please see section 1(s) of M.G.L. c. 151A for more information. 

Cash tips 

If an employee reports $20 or more in tips in a calendar month, those tips are considered wages subject to PFML contributions. 

Employers must remit 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.

Please see section 1(s) of M.G.L. c. 151A for more information. 

Deferred compensation plans 

Both employee and employer payments to a deferred 401(k) compensation plan are wages subject to PFML contributions. 

Wages that are not subject to PFML contributions

Non-401(k) retirement plans and cafeteria plans 

Most often, payments to or from retirement plans are not wages subject to PFML contributions. 

Employer payments to a cafeteria plan (such as dependent care assistance or a health savings account) are not wages subject to PFML contributions as long as they are used to fund benefits that are exempted from wages (please see section 1(s) of M.G.L. c. 151A for more information). Employee payments to a cafeteria plan are wages subject to PFML contributions to the extent that they are part of an employee’s salary. Cash distributions from cafeteria plans are considered wages subject to PFML contributions.  

Please see section 1(s) of M.G.L. c. 151A for more information. 

Unused sick or vacation pay 

Compensation paid to a worker for unused sick or vacation hours at the time of separation of employment is not subject to PFML contributions. 

Please see section 1(r) of M.G.L. c. 151A for more information. 

Wages from employees who receive both W2s and 1099-MISC forms

In general PFML law follows the same standards as Unemployment Insurance law in terms of what wages are and are not subject to contributions. If an employee receives wages from a Form W2, any Form 1099-MISC wages from the same employer are subject to contributions as well. 

Fishing Vessels 

Generally, if a large vessel’s crew is issued a Form W-2 for wages earned for their time on the vessel, they are considered employees and therefore, any Form 1099-MISC payments from that employer would also be subject to PFML contributions, unless the vessel weighs 10 net tons or less. If the vessel’s weight is under 10 tons, all employee wages are excluded from PFML. 

Income limit

PFML follows the same annual income limits as those set by the Social Security Administration for the Social Security Program. The 2019 income limit is set at $132,900. Social Security income limits typically reset annually and remain in effect for the calendar year. 

The 2019 PFML income limit is calculated on wages or payments made to covered individuals from the start of contribution withholdings, Oct. 1, 2019. It's not calculated on year-to-date wages.

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Last updated: July 11, 2019
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