Many Massachusetts employers providing Paid Family & Medical Leave (PFML) benefits have been contributing to the State Fund since October 1, 2019. Employers with approved private plans were not required to contribute to the State Fund, since they went to the private market, to a fully funded insured plan. Aside from this difference, do employer/employee contributions work the same way for private plans as they do for the State Fund? Well, not necessarily. Private plan benefits must be equal to or more generous than the State Fund, and – most importantly – private plans must not cost the employee more in terms of their maximum employee contribution. In this post, we explore how private plans’ rates are not tied to the rates for the State Fund, while employers still have to adhere to the maximum employee contribution set by the Commonwealth. We will look at a few realistic examples to illustrate what this means. Let’s get started!
How Does the MA PFML Maximum Employee Contribution Work for Coverage through the State Fund?
In Massachusetts, the total contribution rate for the State Fund for 2021, split between employer and employee is 0.75% of eligible wages, which include salaries, hourly pay, non-cash tips, and stipends, commissions and bonuses, overtime, vacation, or sick pay, 401K employer contributions, and tips, capped at the income limit set annually by the Social Security Administration. For employers with 25 or more covered employees, the total contribution rate can be broken out as follows:
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Employers with 25 or more covered employees
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Medical Leave
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Family Leave
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Contribution, as a % of eligible wages
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Total Contribution to State Fund (Employer & Employee combined)
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0.75%
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0.62%
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0.13%
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Maximum employee portion
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Up to 40% of 0.62% =
0.248%
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Up to 100% of 0.13% =
0.13%
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Total Max. Employee Contribution
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0.378%
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Smaller employers are not required to pay the employer share of the medical leave contribution. While the maximum percentage on the employee contribution for Medical Leave is higher, the overall maximum employee contribution is the same amount, whether they work at an employer with more or less than 25 lives. It does, however, lower the total contribution amount to the State Fund to 0.378%.
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Employers with less than 25 covered employees
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Medical Leave
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Family Leave
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|
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Contribution, as a % of eligible wages
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Total Contribution to the State Fund (Employers not required to contribute)
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0.378%
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0.248%
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0.13%
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Maximum Employee portion
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Up to 100% of 0.248% =
0.248%
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Up to 100% of 0.13% =
0.13%
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Total Max. Employee Contribution
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0.378%
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So, in either case, the maximum contribution an employer can deduct from an employee’s eligible wages for 2021 is $0.38 per $100 capped at the annual income limit set by the Social Security Administration for the Social Security Program.
Private Plan Contribution Rate Calculations for MA Paid Family & Medical Leave
Private plans are fully underwritten by insurance carriers.
So, now let’s look at two example quotes from a private plan carrier and what it may mean for each Massachusetts employer*:
Company 1 has 30 covered employees and is quoted a combined rate of 0.81% for Family Leave and Medical Leave coverage (allocated 0.13% for Family Leave; 0.68% for Medical Leave), which is 0.06 higher than the combined 0.75% contribution rate set by the State for 2021.
The employer can’t collect more than the respective maximums for the Medical Leave and Family Leave components indicated in the tables above (i.e., 0.13% Family Leave; 0.248% Medical Leave). In this example, the employer would be required to fund the portion of the Medical rate that exceeds the maximum employee contribution rate (plus any portion of the employee contributions they want to spare their employees from- since the employer may, at their discretion pick up all or a portion of the employee’s share of contributions).
Company 2 has 250 covered employees and is quoted a combined rate of 0.35% for Family Leave and Medical Leave coverage (allocated 0.13% for Family Leave; 0.22% for Medical Leave), which is 0.40 less than the combined 0.75% contribution rate set by the State for 2021.
In this case, since the quoted rates for Family and Medical Leave are not above the 2021 maximum employee contribution rate for each leave type respectively (i.e., 0.13% Family Leave; 0.248% Medical Leave), the employer may choose to deduct the full 0.35% from the employee to cover the total cost of coverage. The employer may also pick up all or a portion of the employee’s share, at its discretion.
*These examples are for illustrative purposes only and are not intended to be a guarantee of coverage or rate.
The Private Plan Advantage
Price is not the only factor in deciding between the state fund or a private plan. There are other considerations, such as scalability, fast turnaround times for claims processing, and service. Learn how to switch to a Private Plan here.
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This blog post is for informational purposes only and is not intended to provide legal counsel. Please consult with an appropriate professional for legal and compliance advice. Any Massachusetts Paid Family and Medical Leave (PFML) is as of the blog post’s date stamp; it is based on the applicable statutes and regulation, and may change as regulations evolve or the Commonwealth of Massachusetts issues guidance regarding PFML regulations.