Q1 2025 PFML update: The latest from across the US
Read more from the Guardian Absence Management blog
The landscape of Paid Family and Medical Leave (PFML) continues to evolve across the country, and it's important for employers to stay informed about the most recent legislative changes and tax guidance to remain in compliance and support their workers’ needs. As more states continue to introduce and update their PFML programs, understanding eligibility, funding, and reporting requirements is crucial for organizations of all sizes.
In our recent webinar, “Quarterly PFML update: The latest from across the US”, Guardian’s Mike Byro, Senior Counsel, Tax; Susan Murphy, Product Lead for Paid Leave Products; and Erin Turnamian, CLMS, Regional Absence Practice Leader, shared their knowledge and discussed new developments in PFML laws, IRS tax updates, and important PFML changes in Colorado, Maine, Maryland, Minnesota, and Delaware.
“Every quarter when we speak, you'll see the map changes,” explains Murphy, discussing the rapidly changing nature of PFML legislation in the US, “and we're actively monitoring these things.” Check out these key insights from the webinar to help your organization stay up to date with the latest PFML guidance:
The fundamentals: What PFML looks like in 2025
Employer and employee eligibility
Most PFML programs apply to organizations with at least one employee working within the state, although some exemptions may exist.
Employees typically qualify based on low eligibility thresholds, such as meeting certain earnings or length of service requirements.
Common leave reasons
An employee’s own serious health condition.
Bonding with a new child.
Caring for a family member with a serious health condition.
Military related needs, such as exigency or caring for an injured service member.
Safe leave for victims of domestic violence.
Organ or bone marrow donation.
Job protection and administration
Many PFML programs offer some form of job protection, helping to ensure employees can return to their job after a leave.
Most states allow employers to choose between remaining in the state-administered program or opting out for a private plan through an exemption process.
Funding and benefits
PFML programs are often funded through a combination of employer contributions and employee contributions deducted from payroll.
Benefits are typically calculated as a percentage of the employee's earnings and tiered so that lower wage earners are often eligible for a greater wage replacement than higher wage earners. Benefits cap at a maximum amount, which is typically adjusted each year.
The definition of family member has expanded in many states to include individuals like grandparents, siblings, parents-in-law, or people considered “like family."
IRS guidance on state administered PFML programs
Revenue Ruling 2025-4, recently released by the IRS, provides long-awaited guidance on the tax treatment of contributions to and benefits from state administered PFML programs. The ruling does not apply to private and self-insured plans. To learn about this ruling in greater detail, visit the webinar here. Here are some key points about this IRS guidance:
Both employer and employee contributions are deductible as state taxes. Employee contributions are included as wages on an employee’s W-2, including any portion of the employee contribution that an employer voluntarily pays.
Paid family leave benefits are reportable on a Form 1099. The full amount of these benefits is included in an employee’s income but are not considered wages.
For paid medical leave, amounts attributable to pre-tax employer contributions are included in an employee’s income as wages. Taxable benefits are reportable on a W-2 under the third-party sick pay rules.
Additionally, 2025 will serve as a transition year for IRS enforcement and administration of these new reporting requirements. Employers enrolled in state programs should take steps now to ensure they are prepared for full compliance as the year goes on.
State updates at a glance: CO, DE, MN, MD, and ME
“Due to the lack of a national paid leave plan, many states have been taking action to better protect their workers’ income,” shares Turnamian. Since PFML legislation varies state-by-state, it’s important for employers — especially those with workers located across the country — to stay on top of changes within each state’s guidelines.
Recently, some key changes have been taking place in Colorado, Delaware, Minnesota, Maryland, and Maine. If you have employees in any of these states, here are some important updates that your organization needs to know:
Colorado (CO):
A recent bill has been proposed to permit 12 additional weeks of paid leave for parents with a child in a NICU (neonatal intensive care unit) and a change to the state rate for 2026. Guardian is continuing to monitor the bill.
Delaware (DE):
1/1/25: Contributions (including employee payroll deductions) began for the state plan.
4/30/25: First due date for contributions to the state plan.
10/1/25 - 12/1/25: Next window for employers to apply for a private plan for a 1/1/26 effective date.
1/1/26: Benefit payments begin.
Minnesota (MN):
By December 2025: employers must notify employees about their rights and benefits under the program.
1/1/26: Benefit payments will begin for both the state and private plan programs.
1/1/26: Employee payroll deductions will begin. Employers are responsible for premium (includes both employee and employer portions) to either the state or private plan.
Maryland (MD):
Key dates have been paused: On February 14th, 2025, the Maryland Department of Labor proposed an 18-month delay to the MD PFML program.
Maine (ME):
1/1/25: Contributions (including employee payroll deductions) began. All employers must pay into the state fund for Q1 2025.
4/1/25: First date that applications for substitutions (private plan applications) will be accepted.
4/30/25: Due date for the Q1 2025 wage reports and premium payments.
5/1/26: Benefit payments will begin.
Employers in these states should prepare to adjust their payroll systems, notify employees of their rights, and choose whether they participate in the state plan or apply for private plan exemption, as applicable.
Stay informed and prepared
For a more in-depth look at PFML across the country — including more information on eligibility, scope of benefits, rates and contributions, key dates, and employer next steps — check out the full webinar here.