Minnesota State Wire

Minnesota employers are preparing for the rollout of the state’s Paid Family and Medical Leave (PFML) mandate, which is set to take effect on January 1, 2026. The legislation, passed in 2023 despite opposition from the National Federation of Independent Business (NFIB), will require small businesses to comply with new regulations affecting both employers and employees.

Under the PFML program, employers must establish both an Employer Account and a Paid Leave Administrator Account. These accounts will be used to submit wage reports, pay payroll taxes related to paid leave, review leave applications, and manage determinations. Employers can register for these accounts on Minnesota’s official websites.

Businesses are also required to designate a Paid Leave Administrator as the main contact for the PFML program within their organization. Guidance on setting up this role is available through the state’s resources.

The mandate introduces new notice requirements. By December 1, 2025, employers must display a workplace poster outlining PFML benefits in a location visible to all employees. This poster must be available in English as well as any other language spoken by five or more workers at the business. Additionally, individual notices about PFML benefits must be provided to each employee in their primary language by the same deadline. Employees are expected to acknowledge receipt of these notices.

Employers have flexibility under Minnesota law to substitute the state-mandated plan with an equivalent private or self-insured plan if it meets or exceeds state coverage standards. Requests for approval of such plans can be submitted at any time but should ideally be filed by November 10, 2025 for plans intended to start with the launch of the program.

Regarding taxation, guidance from Minnesota’s Department of Employment and Economic Development (DEED) references IRS Revenue Ruling 2025-4 for federal tax treatment of payroll taxes and benefits associated with paid leave programs. Employers may deduct their share of payroll tax contributions as excise taxes; additional contributions above minimum requirements can be treated as business expenses but must also be reported as wages if paid on behalf of employees.

Employees who itemize deductions may deduct their share of payroll taxes as state income tax under certain conditions. Any employer-paid portion above what is required is considered taxable compensation for employees.

Family leave benefits under PFML will not count as employment wages and are not subject to employment taxes; they will be reported annually via IRS Form 1099. Medical leave benefits funded by employer contributions are treated differently: those amounts are considered wages subject to income tax withholding and some federal employment taxes.

The initial payroll tax rate for 2026 is set at 0.88% on each employee’s wages up to the FICA wage base maximum. This rate will be reviewed annually based on actuarial studies but cannot exceed 1.1% without legislative approval. Employers must cover at least half this tax but may deduct up to half from employee paychecks starting January 1, 2026; quarterly payments begin April 30, 2026.

DEED provides several resources—including toolkits, checklists, sample notifications, webinars, and a payroll tax calculator—to help businesses understand and prepare for compliance with PFML requirements.

"NFIB wants to ensure that [small business owners] have the necessary information," according to materials distributed about the new mandate.

Employers seeking further details can consult DEED’s Employer Resource Toolkit or visit the Minnesota Paid Leave website for frequently asked questions and additional support materials.