Page 10 - PMFL Employer Toolkit

Paid Leave benefits
Will Paid Leave benefits be taxed?
On January 15, 2025, the Internal Revenue Service (IRS) issued Revenue Ruling 2025-4, which explains how the federal government will approach income taxes for premiums and benefits received from a program like Minnesota Paid Leave. For questions or comments on the guidance, please contact the IRS as directed in the IRS guidance.
Minnesota follows federal law to determine when income is included or excluded from a taxpayer’s gross income. This means Minnesota will generally conform to the IRS conclusions about federal gross income.
When Minnesotans apply for Paid Leave, they will have the option to withhold state and federal taxes from their weekly benefit. If an employee chooses this option, Minnesota Paid Leave will withhold 5% for state taxes and 10% for federal taxes. These are reductions set in Minnesota statute, not by the IRS. Learn more information on Paid Leave and taxes.
Will the state pay individuals directly?
Yes. Paid Leave benefit payments will be paid by the state to individuals under the program.
Can an employer make up the difference between partial and full wage replacement for an employee while they are on leave?
Yes. Employers will be able to designate certain paid benefits like Paid Time Off, vacation and sick time as “supplemental benefits,” which will allow employees to choose to receive up to full salary continuation during their leave. The decision to offer supplemental benefits is completely up to the employer.
Paid Leave and other programs
How is Paid Leave different than the Family and Medical Leave Act (FMLA)?
The Family and Medical Leave Act (FMLA) is a federal program administered by the US Department of Labor’s Wage and Hour Division. FMLA entitles eligible employees to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage. Minnesota Paid Leave and FMLA leave may be taken concurrently, but the requirements are different. Employers can require that leave taken under Paid Leave run concurrently with leave taken for the same purpose under FMLA.
FrequentlyAskedQuestions (continued)
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