The Minnesota Department of Employment and Economic Development (DEED) is expecting to implement a higher payroll tax than initially projected if the proposed Paid Family and Medical Leave Program becomes law. If the bill is passed, the new program will launch in 2026 with a payroll tax of 0.88% instead of the previously stated 0.7%. This tax will be split between employees and employers. The tax rise is based on an updated actuarial analysis by Milliman who conducted another cost analysis at the request of DEED to review the state’s new paid leave program.

According to House fiscal staff, in the first year, they estimate that the 0.88% payroll tax will generate over $300 million in revenue for the paid leave fund, whilst the state will distribute over $1.6 billion in benefits. The tax that employees will have to pay is about 0.44% of their taxable wages in the first year instead of the previous 0.35%. Employers have the option to offset a portion of their employee’s costs.

The current amendments to the paid leave bill supported by Democratic-Farmer-Labor House members propose a seven-day waiting period for all medical claims which will be paid retroactively. New parents, however, will receive payments for the initial week of leave without any delay.

DEED stated that a 0.88% payroll tax will be necessary if the proposed retroactive payment scheme becomes law. The Senate is expected to discuss the amendments to the paid leave bill this week with considerations to make the program affordable, such as leaving the first week of leave unpaid unless a worker has less than 80 hours of paid time off saved.

If you have any questions or require more information regarding Paid Family Leave, consider contacting PFL. Information including how to get through to them and their phone number can also be found on www.eddcaller.com. Eddcaller.com not only provides ways to contact PFL, but also offers resources regarding other related topics such as EDD, SDI, and more.