Starting January 1, 2026, benefits administered by PFML are taxable under IRS guidelines.

Certain portions of medical leave benefits will be treated like third-party sick pay
(wages) starting on January 1, 2026.

Employers with employees who receive medical leave benefits that are considered
third-party sick pay will be responsible for remitting employer portions of FICA
(Medicare and Social Security) and FUTA (federal unemployment) taxes on these
benefits and reporting the benefits on the employee’s Form W-2.

DFML will provide employers with information about the benefits paid and the taxes
withheld through the DFML Employer Portal. Employers should make sure that the
appropriate personnel or entities have access to the Employer Portal to receive this
important tax-related information.

State and federal income taxes on medical leave benefits that are considered third-
party sick pay will be withheld at the option of the employee.

There is no change in the treatment of family leave benefits. These benefits will be
reported to employees and the IRS on Form 1099-G. Employees may choose
whether to have state and federal income taxes withheld on family leave benefits

This applies only if employees take Paid Family and Medical Leave.

Employers must comply with remitting and reporting requirements and should have access to the employer portal of DFML for these purposes.

For more information visit the PFML Tax Information for Employers and the memo on the DFML website.

If employees would like more information, refer them to Taxes on Paid Family and Medical Leave (PFML) benefits.