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Paid Family and Medical Leave (PFML) programs have become a crucial aspect of modern employee benefits, ensuring workers can take time off for medical and family-related needs without suffering financial hardship. As more states adopt PFML programs, employers, HR professionals, and benefits administrators need to understand the nuances of these programs, including their funding mechanisms, eligibility criteria, and tax implications.

This guide provides a comprehensive overview of PFML, including its history, the key differences between Paid Medical Leave and Paid Family Leave in the United States, tax considerations, private plan applications, and implementation best practices. By the end of this guide, you will have a clear understanding of how PFML works and what steps to take to ensure compliance and successful integration into your benefits offerings.

What is PFML?

Paid Family and Medical Leave (PFML) is a state-mandated program that provides eligible employees with partial wage replacement when they take leave for qualified medical or family reasons. These programs are designed to support workers who need time off to recover from serious illnesses, care for family members, or bond with a new child while maintaining financial stability.

Common PFML program designs

Most PFML programs follow a similar structure, although specific details vary by state. The most common program designs include:

• State-administered programs: These are managed by state governments and funded through payroll taxes.
• Employer-provided private plans: Employers can apply for an exemption to offer equivalent or superior benefits through private insurance or self-funded programs. Check out our recent Paid Leave Minnesota article for more information on what that could look like in your state.
• Hybrid models: Some states allow a mix of state and private plans, giving employers flexibility in how they provide benefits.

Funding methods

PFML programs are typically funded through payroll taxes paid by employers, employees, or both. Funding mechanisms vary by state, with some states requiring only employee contributions, others requiring only employer contributions, and some requiring shared funding.

Reasons for leave

Employees may qualify for PFML benefits for the following reasons:

• Medical leave: According to the Paid Family and Medical Leave Act, serious health condition recovery—including surgery, illness, or childbirth—is typically included under medical leave.
• Family leave: Bonding with a new child (through birth, adoption, or foster placement) or caring for a family member with a serious health condition.
• Military leave: Attending to family matters related to a military family member's deployment.
• Safe leave: Addressing personal matters related to domestic violence, sexual assault, or stalking.

Qualified family members

The definition of a "qualified family member" varies by state but generally includes:

• Spouses and domestic partners
• Children (biological, adopted, foster, or stepchildren)
• Parents and parents-in-law
• Siblings
• Grandparents (in some states)

What is the difference between PML and PFL claims?

While PFML is an umbrella term, it encompasses both Paid Medical Leave (PML) and Paid Family Leave (PFL), which serve different purposes.

Paid Medical Leave (PML)

PML provides income replacement for employees who need time off due to their own serious health conditions. It is typically granted for a specific period based on medical necessity and requires supporting documentation from a healthcare provider.

Consider the following maternity leave scenarios:

• Scenario 1: An employee with a physically demanding job and no job accommodation is medically supported to take an 8-week pre-partum leave, followed by 8 weeks of post-partum leave after a cesarean section. The total 16 weeks would be payable under PML.
• Scenario 2: An employee with a normal delivery initially takes 6 weeks of leave. However, they develop postpartum depression and require additional medically supported leave. If the condition persists, they may qualify for up to the 16-week PML maximum.

Paid Family Leave (PFL)

PFL, on the other hand, is used for situations such as bonding with a new child (through birth, adoption, or foster placement) or caring for a seriously ill family member. Once an employee transitions to PFL, they are subject to a 12-week maximum leave period unless medical complications arise, warranting a return to PML.

A brief history of paid leave programs in the United States

Paid leave programs in the United States have evolved over time, with significant milestones shaping today's landscape.

Temporary Disability Insurance (TDI) in the 1940s

The first paid leave programs were Temporary Disability Insurance (TDI) programs established in the 1940s in Rhode Island, California, New Jersey, and New York. These programs primarily covered short-term medical disabilities but did not include family leave.

Expansion of paid leave programs

Since 2002, several states have enacted PFML programs. Currently, thirteen states and the District of Columbia have established programs, with four states set to begin providing benefits in 2026.​

An overview of PFML tax services

Employers have two main tax reporting options for PFML programs:

1. Tax reports only: Employers receive tax reports but handle tax withholdings independently.
2. W2 reporting with FICA match service: Employers opt for full-service reporting, including federal tax withholdings and employer FICA contributions.

Tax considerations

• Employer payments: No taxes are withheld when benefits are paid to the employer.
• Employee payments: Paid Family Leave benefits over $600 annually are reported on a 1099 form.
• Medical leave benefits: Treated as third-party sick pay, with taxes withheld and reported on a W-2.

Submitting a PFML application

Employers opting for private PFML plans must submit a detailed application, including reporting all additional entities and Federal Employer Identification Numbers (FEINs). Some states also require a fee per entity.

The application process can be complex, requiring compliance with various state regulations. For more details on the private PFML application process, reach out to your local Christensen Group Insurance expert for guidance on submitting an application in your state.

Tips for PFML implementation

Effective Paid Family and Medical Leave Act small business implementation requires:

• Clear communication: Educate employees about eligibility, benefits, and the application process through meetings, training sessions, and written materials.
• Process training: Conduct thorough training sessions for HR teams and management to ensure consistency in handling claims and compliance with state laws.
• Documentation management: Develop a streamlined system for tracking applications, approvals, and ongoing leave requests to prevent any errors or delays.​

Final thoughts

PFML is a critical benefit that supports employees while ensuring business continuity. Employers must stay informed of evolving regulations, tax implications, and compliance requirements. Implementing a well-structured PFML program can improve employee satisfaction, retention, and overall workplace morale.

For expert guidance on PFML implementation, contact Christensen Group Insurance today. Our experienced professionals can help you navigate the complexities of PFML and ensure compliance while optimizing your benefits strategy.