The Massachusetts Department of Family and Medical Leave has released two major updates affecting Paid Family and Medical Leave (PFML) benefits and contributions beginning in 2026. Employers must review these changes now to ensure compliance ahead of the January 1, 2026 effective date.
New Guidance on Tax Treatment of PFML Benefits and Contributions
The Department issued a memorandum clarifying how PFML benefits and contributions should be treated for federal tax purposes. The guidance reflects recent IRS rulings addressing state-administered paid family and medical leave programs. Notably, the memorandum does not address private or self-insured PFML plans.
Family leave PFML benefit payments are considered taxable income but are not wages for employment tax purposes. These payments will be reported by the Department on Form 1099-G, and employers will not have additional reporting or withholding responsibilities.
Medical leave PFML benefits have a more complex structure. For employers with 25 or more employees, Massachusetts requires the employer to cover 60% of the medical leave PFML contribution. As a result:
- Sixty percent of an employee’s PFML medical leave benefit is treated as taxable wages subject to income tax and employment taxes and must be reported on the employee’s W-2.
- The remaining forty percent is not taxable and does not need to be reported on a W-2.
Beginning January 1, 2026, the Department will withhold the employee share of FICA on the taxable portion of PFML medical leave benefits. Employers with 25 or more employees will be responsible for the employer portion of FICA and FUTA taxes on these taxable benefits. The Department will transmit benefit and withholding information through the Employer Portal.
Employers with fewer than 25 employees do not fund the employer share of medical PFML contributions. Therefore, medical leave PFML benefits paid to employees of these smaller employers are not taxable and do not create additional employer reporting obligations.
The memorandum also outlines tax rules for PFML contributions. All employers must treat employee PFML contributions as taxable wages for W-2 reporting. If an employer voluntarily pays the employee’s required PFML contribution, that payment is also treated as taxable wages. Required employer PFML contributions are not considered wages.
Although the IRS ruling is currently in effect, calendar year 2025 is considered a transition period. Employers will not be penalized for failing to follow the new rules for PFML benefits paid in 2025, but full compliance is required starting January 1, 2026.
It is essential for employers to maintain access to the Department’s Employer Portal to retrieve taxable benefit information and ensure accurate W-2 reporting.
2026 PFML Contribution Rates and Maximum Benefit Amount
The Department has announced the PFML contribution rates and maximum weekly benefit amounts for 2026.
Effective January 1, 2026, the maximum weekly PFML benefit increases to $1,230.39, up from $1,170.64 in 2025.
PFML contribution rates for 2026 remain unchanged:
- Employers with 25 or more employees:
• Family leave contribution: .18%
• Medical leave contribution: .70%
• Total: .88% - Employers with fewer than 25 employees:
• Family leave contribution: .18%
• Medical leave contribution: .28%
• Total: .46%
Employers with approved private or self-insured PFML plans remain exempt from submitting contributions to the state but must update their plans to reflect the new 2026 maximum benefit amount.
Employers are also required to:
- Display the updated PFML workplace poster
- Issue 2026 rate sheets to all current employees
- Provide PFML rights-and-obligations notices to new employees within 30 days of their start date
Updated posters, rate sheets, and employee notices—including versions for employers with fewer than 25 employees—are available on the Department’s website in multiple languages.