Effective January 1, 2026:
On May 25, 2023, Governor Tim Walz signed HF 2, a Paid Family and Medical Leave (PFML) bill, which will provide employees up to 20 weeks of PFML per year. The program will be administered by a new Family and Medical Benefit Insurance Division (the “Division”) of the Department of Employment and Economic Development (DEED). Contributions will be split between employers and employees and will begin on January 1, 2026.
This requirement applies to employers regardless of their size, and regardless of the number of employees located within Minnesota. All employees located within Minnesota, with certain exceptions, will be eligible for PFML benefits if they meet the financial eligibility criteria under the law. Specific seasonal employees are excluded from coverage and self-employed individuals and independent contractors are excluded but may choose to elect to purchase coverage under the program. To be eligible for PFML benefits, an employee must have earned at least 5.3% of the state average annual wage over their base period, which is defined as the most recent four completed calendar quarters before the employee's application for benefits. An employee can aggregate wages earned from multiple employers to satisfy the financial eligibility test.
Employers must pay quarterly premiums to the family and medical benefit insurance account on the taxable wages paid to each employee. Beginning January 1, 2026, the employer premium rates shall be:
Employers must pay at least half of the annual premiums. Employees, through a wage deduction, must pay the remaining premium not paid by the employer. Employers may also choose to pay the entire premium of 0.7%.
Employers with fewer than 30 employees will qualify for a small business exemption and will pay a reduced amount, which the fund will absorb; employees at small employers will pay the same as those at larger employers.
An employee may take up to 12 weeks of paid leave for their own serious health condition and up to 12 weeks of paid leave for bonding, family care, safety, or a qualifying exigency. However, employees are limited to an aggregate of 20 weeks of paid leave in a benefit year.
An employee may take leave intermittently for any of the reasons covered under the law. An employer may limit intermittent use of leave to 480 hours in any 12-month period. The employee would be able to take any remaining leave continuously. The minimum duration of benefits is one workday in a work week.
Except for benefits for bonding leave, a claim for benefits must be based on a single qualifying event of at least seven calendar days. The days must be consecutive unless the leave is intermittent.
Eligible employees will not receive their full wages for PFML. The state will apply a maximum weekly benefit amount that will be calculated by the Division. An employee’s weekly benefit is calculated by applying the following percentage to the employee’s average typical work week and weekly wage during the high quarter of their base period:
Benefits are to be paid weekly. The weekly benefit amount will be prorated when:
An employee may choose to use vacation pay, sick pay, paid time off, or disability insurance in lieu of PFML benefits if the employee is concurrently eligible. That time off would be protected but would make the employee ineligible to receive PFML benefits from the state.
An eligible employee must file an application for benefits and establish a benefit account with the new Division to obtain benefits. Benefits will be paid from the Division listed above, not directly by the employer. The application can be filed up to 60 days in advance of when the leave will be taken. It must include certification supporting the request.
Coverage falls under two categories: Leave for the employee’s own serious health condition; and other leave, including family care, bonding, safety, or qualifying exigency, defined as follows:
‘’Family member” is defined as:
An employer may offer a private plan, so long as that plan provides benefits and protections that meet or exceed the benefits and protections provided under the public plan. A private plan must be approved by the Division.
A private plan may be self-insured or insured through a carrier. An employer that has an approved private plan does not need to pay the tax premiums required by the statute, but there is a requirement to pay a private plan approval and oversight fee. The employer must post notice of the private plan for its employees.
The employee must provide at least 30 days’ advance notice to the employer if the need for leave is foreseeable. Otherwise, the employee must give notice as soon as practicable. The employee is only required to provide notice once, but the employee must advise the employer as soon as practicable of any date changes. The employee must provide at least oral, telephone, or text message notice sufficient to make the employer aware of the need for leave and anticipated timing.
Employers must also include information about amounts deducted and paid to employees for PFML on an employees’ earnings statement.
For more information on Minnesota's wage and payroll tax laws, check out our Minnesota Wage and Payroll Tax Facts page.
Employers do not need to take any immediate action regarding this PFML requirement as many details are still forthcoming. Paylocity is actively monitoring PFML and will provide updates, particularly as actions become required.
Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.
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