Effective January 1, 2026, the Massachusetts Department of Family and Medical Leave (DFML) announced an increase to the maximum weekly Massachusetts Paid Family Medical Leave (PFML) benefit. For the second year in a row, contribution rates from employers and employees that fund the public program will remain the same.
In addition, the DFML has issued a memo regarding IRS Revenue Ruling 2025-4 which addresses the tax treatment of state paid family and medical leave benefits. The DFML memo and other information on the DFML website provides guidance on how the IRS Ruling impacts Massachusetts employers.
DFML Increases Maximum Weekly Benefit Amount for 2026 and Maintains 2025 Contribution Rates
Weekly Benefit Amount: Effective January 1, 2026, the maximum weekly PFML benefit will increase to $1,230.39 per week, up from $1,170.64 per week in 2025.
Contribution Rates:
- For 2026, the overall PFML contribution rate for employers with 25 or more covered individuals will remain at 0.88% of eligible employee wages up to the social security taxable maximum.
- The PFML contribution rate for smaller employers – fewer than 25 covered individuals – will remain at 0.46%.
For details on how contributions are split between employers and employees, see the DFML’s PFML Employer Contribution Rates and Calculator.
Private PFML Plans: Employers with an approved private or self-insured PFML plan are exempt from remitting PFML contributions to the Commonwealth. However, they must update their private plans to reflect the new maximum benefit amount. Any required employee contributions to fund a private plan may not exceed the current rates published by the DFML.
Notice Requirements:
- Employers should provide current employees notice of the 2026 contribution rates.
- In addition, employers must provide all new employees with a PFML Notice upon hire. This notice must be acknowledged by employees and maintained as part of their personnel files.
- Updated posters and notices are available on the DFML website here.
DFML Interprets IRS Revenue Ruling 2025-4
In 2025, the IRS issued Revenue Ruling 2025-4, which clarifies the federal tax treatment of PFML benefits provided through state-administered plans. You can find Seyfarth’s client alert on the IRS’ guidance here. As noted above, the Massachusetts DFML issued a memo explaining how this Ruling impacts Massachusetts employers. The DFML memo and other guidance related to the tax treatment of PFML benefits can be found here.
The IRS will begin enforcing the new tax and reporting requirements as of January 1, 2026.
Note: The IRS ruling does not address federal tax treatment of private or self-insured PFML plans. Employers with an approved exemption for a private or self-insured PFML plan should consult with their legal counsel or tax professional to determine tax treatment and reporting obligations.
Taxability of State-Paid Medical Leave Benefits
Large Employers – 25 or More Employees
- For employees of large employers, the employer-funded portion (60%) of PFML medical leave benefit payments is considered taxable third-party sick pay and is subject to federal and state income taxes and employment taxes, which for employees means FICA (Social Security and Medicare). Employees can elect to have the DFML withhold income taxes from these payments.
- For large employers, as noted above, the employer-funder portion (60%) of the PFML medical leave benefit payments is subject to employment taxes – both FICA and FUTA (i.e., unemployment).
- The DFML will withhold and remit the employee portion of FICA taxes on taxable PFML medical benefits, unless the employer is exempt from such taxes. Accordingly, large employers are responsible for remitting the employer share of FICA and FUTA taxes on the employer-funded portion of PFML medical leave benefits.
- The DFML will provide information about the benefits paid and the taxes withheld via a Daily Sick Pay Report that employers can access through the DFML’s Employer Portal This information should enable large employers to calculate the employer share of FICA and FUTA.
- Large employers must also report the taxable portion of the PFML medical leave benefit payments as income to the employee on the employee’s W-2.
- The employee-funded portion (40%) of medical leave benefit payments is not subject to income tax or employment taxes. If an employer voluntarily pays all or part of the employee’s portion, that amount will be treated as if made by the employee.
Small Employers – Less than 25 Employees
- Because small employers (fewer than 25 employees) are exempt from medical leave contributions, the medical leave benefits received by employees are not subject to employment taxes or income taxes.
Taxability of State-Paid Family Leave Benefits – All Employers
- Family leave benefit payments are considered part of an employee’s gross income. However, these payments are not considered wages subject to federal income taxes or employment taxes (i.e. FICA and FUTA).
- Employees can elect to have the DFML withhold taxes from these family leave benefit payments.
- The DFML will provide employees with a Form 1099-G reflecting family leave benefits paid through the PFML program.
Next Steps for Employers
To ensure compliance and readiness for 2026, employers should:
- Review and update internal PFML policies to reflect the new benefit maximum.
- Distribute updated PFML contribution rate notices to current employees and ensure new hires receive the required PFML notice upon onboarding.
- Coordinate with payroll and tax teams to prepare for new tax reporting obligations under IRS Revenue Ruling 2025-4.
- Ensure access to the DFML Employer Portal to monitor benefit payments and tax withholdings via the Daily Sick Pay Report.
- Utilize the information provided on the DFML Employer Portal to calculate and then remit the employer share of FICA (Social Security and Medicare) and FUTA (federal unemployment) taxes on the employer-funded portion of PFML medical leave benefits.
- Consult legal or tax advisors—especially if operating a private PFML plan—to determine appropriate tax treatment and reporting obligations.
