MA Paid Family Medical Leave Vs Private Plans: What’s the Best Option?

Starting January 1, 2021, employees can start taking leave under the Massachusetts Paid Family and Medical Leave (PFML) program. The program provides workers compensated time away for family or medical reasons, benefits that are paid for by a payroll tax on both employees and employers that’s been collected since October 2019.

Since this program affects your operations, employees’ satisfaction and your bottom line, you may be wondering if there’s another option that could be better for your business. There may be. Massachusetts also allows approved private plans.

Here at Complete Payroll Solutions, we work with clients across the country but are based in Massachusetts so we can provide expertise on local employment laws and regulations to help companies stay in compliance. To help you understand your options when it comes to paid leave, we’ll compare the Massachusetts state PFML program and private plan options in several categories:

• Benefits
• Costs and contributions
• Employer obligations

At the end of this article, you should have enough information to decide if the MA PFML program makes the most sense for you or whether you want to consider a private plan instead.

What is MA PFML?

In Massachusetts, starting January 1, 2021, all employees – whether full-time, part-time or seasonal will be able to take up to 26 weeks of paid leave for medical or family reasons. This also applies to self-employed workers and some independent contractors.

This benefit is funded by a tax paid for by the employee and you as the employer if you have 25 or more employees. If you have less than 25 employees or covered independent contractors, then you don’t have to pay the employer contribution.

What is a Private PFML Plan?

To satisfy the law’s requirements, you can choose to provide medical and/or family leave coverage under a private plan as long as you offer the same or better benefits and protections. That means you can increase benefits to better meet your employees’ needs.

If you decide to go with a private plan, you’ll need to apply for an exemption from the employer contributions to the state PFML program and be approved. You’ll also need to reapply for this exemption every year that you’re using a private plan.

MA PFML Vs. Private Plan Benefits

Under the MA PFML program, covered workers can take paid medical leave for a personal serious injury or illness as well as paid family leave to:

• Care for a sick family member with a serious health condition
• Bond with a newborn child or child after adoption or foster care placement for the first 12 months
• Manage family matters when a member is on active duty in the military and deployed or undergoing medical care

When it comes to family leave, a family member means a spouse or domestic partner, child, grandchild, parent, grandparent or sibling. The parents of an employee’s spouse or domestic partner as well as their guardians also count.

Employees can file for benefits 60 days before the anticipated start date. The amount of benefits they are eligible to receive is based on their average weekly pay when they apply as well as the average weekly pay of workers throughout MA. Currently, the maximum total amount employees can receive in benefits is $850 a week.

If you decide to opt out of the MA PFML plan and get private plan coverage, it has to offer the same or more generous benefits than those we just discussed. That means it has to meet all the minimum requirements of the state plan and not cost employees any more than they’d be required to contribute to the MA PFML program. 

Employees also have to have the same protections and rights under the plan as the state program affords them. 

MA PFML Vs. Private Plan Costs and Contributions

With the Massachusetts PFML program, the required contributions are .75% of an employee’s wages up to the Social Security income limit. .62% of eligible wages go toward the medical leave contribution and .13% towards family leave.  

If you have at least 25 employees, you can have your employees pay the full amount of the family leave contribution but you’ll need to cover at least 60% of the medical leave contribution. Employers may also choose to pay more to reduce the amount employees have to pay. In fact, you can elect to cover up to 100% of the employee contribution regardless of your obligation.

If you have less than 25 workers, then you need to remit a contribution of .378% of eligible wages, a smaller amount since you’re not obligated to pay the employer share.

When it comes to private pay options, what you’ll pay will vary based on your company size and industry. To get a quote, you’ll need to provide the following information:

• Date of birth
• Gender
• Work state
• Annual salary
• Date of hire
• Average hours of work per week

There are too many variables to give an estimated range for the cost of private plan options, but you may be able to find coverage with premiums less than what you’d need to contribute under the state plan. But remember that it can’t cost employees any more than what they have to contribute to the state plan. So if your premiums for a private plan are more, you’ll be responsible for paying anything above the required employee payment.

MA PFML Vs. Private Plan Employer Obligations

As a Massachusetts employer, there are several steps you’ll need to take to comply with the PFML program requirements:

1. Hang up a poster notifying workers of the benefits available under the PFML law.
2. Provide written notice to employees and new hires and get it acknowledged.
3. Calculate your employees’ and your contributions. To complete this step, you’ll need to count your workforce.
4. Set up payroll deductions for collection of the contributions.
5. Remit contributions, even if you’re not required to pay an employer contribution, through MassTaxConnect.

If you have a fully-insured private plan, you’ll also need to notify employees. The big difference is that you’ll only have to worry about paying your premium to your insurer. You won’t need to calculate and submit the contributions. 

Private plan options will also likely provide you a single point of contact for claims inquiries, offer claims management, and keep you updated on anything else you need to do to be compliant.

Which MA PFML Options is Best?

The MA state PFML program is the way to go if you have the internal resources to be compliant, your workforce needs aren’t too complex, and you don’t really want to invest extra time in looking for alternative options. However, you’ll have to spend time on administration.

Private coverage is the best choice if you want to ease your administrative burden by avoiding the remittance process and would prefer to have a third party manage leave claims and compliance to reduce your risks. 

Complete Payroll Solutions can help you decide how to best provide family and medical leave coverage and keep you compliant with the Massachusetts PFML law. Visit our dedicated MA PFML resource page.