Key Takeaways from the Department FAQs and Draft Regulations
Both the FAQs and draft regulations provide helpful clarification on MAPFL’s key provisions (M.G.L. c. 175M). Note that the regulations are still subject to further change and clarification.
- Who does MAPFL apply to? All businesses with more than one employee are required to comply with MAPFL, but self-employed individuals are not. Self-employed individuals are allowed to opt into MAPFL. Employers with fewer than 25 employees are not required to pay the employer portion of premiums for family and medical leave. Note that businesses with fewer than 25 employees, though exempt from the contributions, will still be required to comply with MAPFL reporting guidelines and quarterly submission reports (discussed in greater detail below).
- How is the .63% contribution rate allocated between family and medical leave? The payroll tax of 0.63% that will fund MAPFL program will apply to the first $128,400 of an employee’s annual earnings. The apportionment of the 0.63% tax allocated towards family leave or medical leave will be determined annually by the Department – based on projected benefit costs for each benefit year – and the following year’s contribution rate will be set no later than October 1 of the current year. The first year’s allocation between family and medical leave has been posted on the Department’s website and summarized as follows: of the total 0.63% payroll tax, 0.52% of payroll deductions will be allocated towards medical leave and 0.11% of payroll deductions will be allocated towards family leave contributions. Recall that employers with more than 25 employees will be required to cover 60% of the employer’s share of medical leave, while employers with less than 25 employees will not.
- Reporting and Calculating Contributions: Beginning on July 1, 2019, each calendar quarter, employers (and self-employed individuals opting into coverage) will be required to file an earnings report and remit contributions through the Department of Revenue’s MassTax Connect system. The report must provide the name, social security number, wages or any other earnings of all employees and independent contractors. To emphasize, employers must provide this information for any independent contractors as well. The report must include the federal employer identification number of the employer and identification number that any employer or self-employed individual is required to include on a withholding tax return filed with the state. Based on the information provided, the Department will calculate the total quarterly contribution amount owed, which must be remitted to the Department within 30 days after the end of the calendar quarter.
- For purposes of tallying an employee workforce, an employer must include all full-time, part-time, seasonal and temporary employees and independent contractors during each payroll period, divided by the number of payroll periods in the previous calendar year.
- Exemptions: Employers that offer a private leave plan with the same or greater benefits provided under MAPFL can apply for an exemption from the program on an annual basis. Exemptions will be accepted by the Department on a rolling basis, will be effective for one year, and may be renewed annually. Employers can apply for exemptions from medical leave coverage, family leave coverage, or both. Notably, the Department can audit any private plan maintained by an employer and can withdraw approval when the terms or conditions of a private plan have been changed or violated. Before any proposed changes to a private plan are made, the employer must notify the Department in writing at least 30 days in advance. Employees that are denied rights under a private plan have the right to appeal the denial to the Department or to a Massachusetts District Court.
- Employee Claims: Employees must file a claim for benefits with the Department using the Department’s approved forms. The forms have not yet been issued by the Department. Employees must also provide employers with at least 30 days’ notice of the anticipated start date of leave, the anticipated length of leave, the type of leave and the anticipated return date. The Department must notify the employer within five business days after an employee has filed a claim, and provide relevant information or records regarding the claim. However, the individual filing a claim must provide the Department with consent to share information with the employer. All MAPFL benefits require a minimum level of certification supporting the need for leave. Within 14 days of receiving a claim for benefits, the Department will notify the employee of their eligibility for leave, and will begin payment of leave benefits, at the earliest, 14 days after the eligibility determination, unless the eligibility determination is made more than 14 days before the onset of eligibility, in which case leave benefits will begin on the date of eligibility.
The Department held the first listening session on January 30, 2019, giving constituents and practitioners a chance to seek clarification of the draft regulations. We attended the session, and noted a reoccurring theme of questions related to the actual implementation of MAPFL program. For example:
- Are employers required to make the first contribution on July 1, 2019, or submit the first quarterly report on July 1, 2019, wait for the Department’s calculation, and make the first contribution within 30 days after the end of the calendar quarter?
- If employer contributions begin on July 1, 2019, can employers apply for exemptions in advance of July 1, 2019 to avoid payments? If so, does the Department plan to clarify how to apply for an exemption based on a private plan in advance of July 1, 2019?
- Are employers with less than 25 employees required to pay the entire contribution sum on behalf of employees and later deduct the full percentage from employees?
- How should employers charge an employee for health insurance costs during their leave, when paid benefits are coming directly from the Department?
- Can MAPFL benefits be reduced by payments received under a private employer’s short-term disability policy?
- How is MAPFL intended to intersect with other leave law entitlements, such as the Family Medical Leave Act (FMLA)? Does use of MAPFL curtail an employee’s rights to FMLA leave later in the same benefit year if the employee was not previously eligible for FMLA?
- When do employer notice requirements go into effect? Previous versions of the law indicated that employers must provide notice of MAPFL leave benefits by July 1, 2019, despite employees not being eligible until 2021.
The Department representatives did not answer these questions, but rather took all questions under advisement.
Though the regulations are not yet final and many issues require further clarity from the Department, employers can begin preparing for the commencement of contributions on July 1, 2019 by following these steps:
January – March 2019
Now is the time to connect with counsel and ask questions about the draft regulations and how they affect your business. Employers should continue to keep an eye out for updates on any changes or clarifications in the regulations between now and the publication of the revised regulations on March 31, 2019, and again for any changes prior to July 1, 2019. Employers should also continue to look for forms on the Department’s website, including a notice of benefits in required languages, forms to apply for private plan exemptions, and employee forms to apply for MAPFL.
March 2019 – July 2019
In the coming months, employers should begin to prepare the following:
- Setting up a MassTax Connect account: All earnings reports and contributions will be made through the MassTax Connect system. Employers or self-employed individuals opting into MAPFL that do not have a preexisting account should register and establish an account before the July 1, 2019 deadline. Follow this link to set up an account. The Department of Revenue’s tutorial on how to set up a MassTax Connect account is available here.
- Employer Notices: Though the notice requirements seem to be in flux, employers should continue to monitor the Department’s website for publications or connect with counsel on the availability of the notice poster prior to July 1, 2019.
- Budgeting: Employer contributions will begin on July 1, 2019, however employee eligibility and contributions will not begin until January 1, 2021. Employers should therefore be using the workforce headcounts and the 0.63% contribution rate (i.e., $6.30 for every $1,000 an employee makes, up through the first $128,400 of the employee’s annual earnings) to budget full payment contributions for 2019 and 2020. Employees should be tallying their workforce headcounts in the prior calendar year (i.e., 2018), to calculate an estimated contribution amount.
July 2019 – January 2021
Over the next year and a half, employers should continue to keep tallies of their workforce and track their quarterly MAPFL contributions for budgeting purposes. Depending on a number of factors including the size and distribution of the employer’s workforce, employers can consider instituting a private plan for either family leave, medical leave or both – and assess the benefits and risks of applying for an exemption to MAPFL. Employers should also check in with counsel by October 1, 2019 and 2020 to determine whether the contribution rate has been adjusted by the Department. As the 2021 eligibility date approaches, employers should begin to examine their current policies to ensure leave entitlements such as parental leave or FMLA (if applicable) are revised to account for leave taken under MAPFL. Leave taken under MAPFL will run concurrently with Massachusetts Unpaid Parental Leave and the FMLA.