By: Michael Lewis

Massachusetts will change Paid Family and Medical Leave (PFML) again on January 1, 2026. The maximum weekly benefit will increase, contribution rates will remain the same, and new federal tax rules will affect how many employers treat PFML medical benefits for payroll tax and reporting purposes.

If you have even one employee working in Massachusetts, you should assume these changes affect you.

What Changes In 2026

• Higher maximum weekly benefit.
  The maximum PFML benefit will increase to a higher weekly cap tied to the new state average weekly wage. Employees who take PFML in 2026 may receive more money than in 2025.
• Contribution rates stay the same.
  The total PFML contribution rate will remain at 0.88 percent of eligible wages for employers with 25 or more covered individuals, and 0.46 percent for employers with fewer than 25. Contributions still apply only up to the Social Security wage base.
• Updated DFML materials.
  The Department of Family and Medical Leave has issued new 2026 posters, rate sheets, and individual notice templates. Employers must post the current PFML notice and give required written notices to covered workers.
• Program basics remain the same.
  Covered workers still may take up to 12 weeks of paid family leave, 20 weeks of paid medical leave, and 26 weeks combined in a benefit year for the same qualifying reasons.

How The New Tax Rules Affect You

New IRS guidance and DFML tax instructions will change federal tax treatment for PFML benefits starting with 2026 payments. The key distinction is between family benefits and medical benefits, and between larger and smaller employers.

• Family leave benefits.
  PFML family leave benefits count as taxable income to the employee. They do not count as wages for federal employment taxes, so they do not trigger FICA or FUTA. DFML will issue Form 1099-G, and employees may elect income tax withholding.
• Medical leave benefits for employers with 25 or more covered individuals.
  Massachusetts requires these employers to fund a portion of the PFML medical contribution. The part of PFML medical benefits that relates to that employer-funded share counts as taxable wages and third-party sick pay. DFML will withhold the employee share of FICA on that portion. The employer must pay the employer share of FICA and FUTA and report those taxable benefits as wages on Form W-2.
• Medical leave benefits for employers with fewer than 25 covered individuals.
  These employers do not pay the employer medical share. PFML medical benefits paid to their employees do not count as wages for federal employment taxes, and they do not trigger FICA or FUTA.

What Employers Should Do Now

1. Confirm that PFML applies to your workforce.
   Identify every Massachusetts employee, including remote staff. Confirm that your payroll system treats those employees as covered for PFML contributions and benefits.
2. Coordinate with payroll and tax advisors.
   Make sure your payroll provider understands the 2026 maximum benefit, the unchanged PFML rates, and the new tax rules for PFML medical benefits. Confirm how they will handle Forms W-2 and 1099-G and how they will track taxable third-party sick pay for larger employers.
3. Update policies and your employee handbook.
   Revise PFML sections to reflect the 2026 benefit cap and contribution structure. Explain how PFML interacts with FMLA, Massachusetts parental leave, earned sick time, vacation, and disability plans. Decide whether employees may “top off” PFML with accrued time off and state that rule clearly.
4. Refresh notices and postings.
   Post the 2026 PFML workplace poster in all required languages and use DFML’s current individual notice templates for new hires and, if needed, current employees. Keep records that show when and how you delivered these notices.
5. Review private PFML plans.
   If you use an approved private or self-insured PFML plan, confirm with your insurer or administrator that the plan still meets or exceeds the state program in 2026, including benefit levels and employee cost sharing.

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