At a glance

• The main takeaway: State Paid Family and Medical Leave programs are multiplying across the country, with requirements often changing rapidly and varying state-to-state.
• Impact on your business: These programs typically carry strict employer requirements and require a careful eye on compliance and tax considerations.
• Next steps: Employers will need to assess applicable state laws and requirements while also evaluating existing systems for compliance.

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The Full Story on State and Local Paid Family and Medical Requirements:

As federal legislation stalls on a national paid leave policy, states and municipalities continue to develop their own programs to address employee needs during family or medical leave events. For tax professionals, the growing complexity of these state and local paid family and medical leave (PFML) laws demands a nuanced understanding of varying tax implications, withholding requirements, and employer obligations.

The Evolving Landscape of PFML

Currently, 13 states and the District of Columbia have enacted mandatory PFML or Paid Medical Leave (PML) programs, with more on the way or pending future implementation. The programs can either be required or voluntary, as some jurisdictions allow for the implementation of a PFML/PML program through insurance but do not specifically require coverage. In general, both required and voluntary programs often provide partial wage replacement for employees who take leave for a variety of reasons, including, but not necessarily limited to:

• Bonding with a new child
• Caring for a family member with a serious health condition
• The employee’s own serious medical condition
• Certain military-related urgent needs or demands

PFML/PML laws differ from the federal Family and Medical Leave Act (FMLA), which provides unpaid, job-protected leave, because they often require both employee and employer contributions to either state-managed insurance funds or privately managed insurance plans. PFML/PML plans, which can also go by different names and titles depending on the state, often function more similarly to other state and local programs, such as State Disability Insurance (SDI), in terms of eligibility and reporting requirements.

PFML/PML coverage requirements often include coverage for both in-state residents and non-residents and may depend equally on where an employee performs their services and where they reside. As such, it is often difficult for employers to determine where and when PFML/PML taxation and reporting is required, and payroll/HRIS systems do not always intuitively capture these requirements. As a result, payroll and HR professionals are often left with the challenge of determining and implementing coverage on a case-by-case basis.

States (and the District of Columbia) with current or scheduled PFML/PFL programs are:

• California
• Colorado
• Connecticut
• Delaware
• District of Columbia
• Maine
• Maryland (2027)
• Massachusetts
• Minnesota (2026)
• New Jersey
• New York
• Oregon
• Rhode Island
• Washington

Key Employer and Tax Considerations

Payroll Tax Withholding and Remittance

Many PFML programs function similarly to state unemployment insurance systems, requiring periodic taxable wage-based contributions at a defined rate. Tax and HR professionals must determine:

• Who funds the program: Some states (e.g., California, New Jersey, etc.) require only employee contributions, while others (e.g., Massachusetts, Colorado, etc.) require shared contributions.
• Tax treatment: Employer contributions are generally deductible, while employee contributions may be pre-tax or post-tax depending on the state and the plan structure.
• Withholding thresholds and caps: Subject wage caps vary by jurisdiction. For example, in Washington state, PFML premiums apply to wages up to the Social Security cap ($176,100 in 2025).

State Registration and Reporting

Employers are typically required to register for the PFML program in each applicable state, file periodic wage reports, and remit contributions. Non-compliance may result in penalties and interest, even for out-of-state employers with remote employees. Registrations may coincide with new employer account requests for State Unemployment Insurance (SUI) or may be a separate process. 

Coordination with Private Plans

Some jurisdictions allow employers to opt out of the public program if they offer equivalent or better private insurance plans, subject to state approval. Massachusetts and Connecticut are examples of states that allow this, but the process requires detailed documentation and annual certification.

Local Ordinances Add Complexity

Cities like San Francisco have implemented supplemental paid parental leave, which requires employers to top-up state benefits so employees receive full wage replacement for bonding leave. This imposes additional cost and tracking burdens on employers operating in multiple jurisdictions.

Remote Workforces and Multistate Compliance

One of the most challenging aspects for tax professionals is determining which laws apply when employees work remotely or across state lines. Key considerations include:

• Primary work location: Most PFML programs apply based on the employee’s work location, not the employer’s headquarters or the employee’s state of residence.
• Apportioning wages: Employers may need to apportion taxable wages across multiple jurisdictions or adjust withholdings when employees move or work in multiple jurisdictions.

Payroll providers may not have the necessary tax expertise to appropriately advise organizations on proper PFML/PML registration and reporting requirements. In addition, some states may require employers to independently engage and maintain the required policies with their insurance providers and internal HR resources to ensure compliance.

Next Steps for Employers on State and Local PFML/PML Requirements

1. Perform an internal review of current compliance: Review where employees are working and living and determine if the entity is registered and reporting in all applicable PFML jurisdictions.
2. Evaluate systems: Confirm that your payroll system can accurately calculate, withhold, and remit PFML contributions.
3. Monitor changes: Stay alert for new legislation, as states are regularly adding PFML/PML requirements (e.g., Maryland and Minnesota).
4. Educate adjacent departments: Collaborate with human resources, legal, payroll, and insurance to facilitate policies and avoid double payment or misclassification.

The bottom line on PFML/PML Requirements

As PFML laws proliferate and grow in complexity, tax professionals are on the front lines of compliance. Understanding the unique features, contribution mechanics, and tax implications of each state and local requirement is crucial. Proactive strategy, accurate payroll processing, and informed guidance can help businesses manage risk and support their workforce effectively.