New PFML Rules & Employer Tax Obligations – Effective 1/1/2026

November 20, 2025

Starting January 1, 2026, the Massachusetts Department of Family and Medical Leave (DFML) will implement new rules impacting tax treatment of PFML benefits and employer responsibilities.

Key Changes:

Medical Leave Benefits paid under the state-administered PFML program are now considered taxable wages for federal purposes as third-party sick pay.
Employers must pay FICA (Social Security & Medicare) and FUTA (Federal Unemployment) on these medical leave benefits.
Taxable medical leave benefits must be reported on Form W-2. (Private PFML plans should confirm whether similar rules apply.)
Family leave benefits remain unchanged and will continue to be reported on Form 1099-G.

Action Steps for Employers:

Ensure DFML portal access for daily sick pay reports to calculate employer taxes.
Update payroll systems for W-2 reporting and employer tax remittance.
Post updated PFML notices and distribute to employees in all required languages.

Additional Updates:

Maximum weekly PFML benefit increases to $1,230.39 (up from $1,170.64 in 2025).
Contribution rates remain at 0.88% for employers with 25+ employees and 0.46% for smaller employers. Employers with 25+ employees must pay at least 60% of the medical leave portion of the contribution; small employers pay no employer share.