Hello I'm Sarah Hipp and welcome to our mini session on Paid Family and Medical Leave. This is one in our series of state overviews and today we will be focusing on Minnesota.
If you are familiar with the state mandated paid leave landscape then you know that this is a rapidly growing space. Paid Family and Medical Leave programs allow employees to take time off work to tend to certain life circumstances and is often job protected. Minnesota is one of a rising number of states that has passed paid leave legislation. Minnesota is unique from other PFML states as it is not requiring a prefunding period contributions. The state program will begin on January 1st, 2026 and eligible workers will also be able to receive benefits as of that same date.
The Paid Family and Medical program will apply to all employers and employees in the state of Minnesota even if the business only employs one employee in the state. Minnesota's program also applies to state and local governments the exception however would be the federal government employees as they are exempt from the law. Like many states, Minnesota looks at an individual's earnings within the state to determine eligibility for benefits. The threshold is set at 5.3% of the state average annual wage and the employee needs to have earned that amount over the year prior to taking leave.
Minnesota also extends coverage to former employees. This coverage would apply for 26 weeks following employment separation or until the employee is hired by a new employer. If the employee files a leave during that 26 week period benefits would be paid for the entire duration of supported leave.
Earlier I mentioned that Paid Family and Medical Leave programs allow employees to take time off of work during certain life circumstances so let's take a look at what those reasons may be. Minnesota has separated its benefit into medical leave, which can be taken for the employees own serious health related needs, and then family leave covers several different situations.
The most common reason for family leave that we see in most states is bonding with a new child. This can be for both birth and non-birth parents as well as parents who are welcoming a new child through adoption or foster care placement. With bonding leave, all time must be taken within the first 12 months following birth or placement.
Another reason for family leave is to care of a family member with a serious health condition. This type of leave follows the same requirements as medical leave, but in this case it is the employees covered family member rather than the employee themselves. In addition we have qualifying military exigencies and safe leave to address needs related to domestic violence or assault. Employees can take up to 12 weeks for both medical leave and family leave in a benefit year, however if an employee is needing multiple types of leave, all time would be combined to 20 weeks in that benefit year.
In regard to the family care leave I just mentioned the Minnesota law has a broader definition of family member than what we see under the federal unpaid FMLA. In Minnesota covered relationships include the parent child and spouse as FMLA does but also expands to in-laws grandparents and siblings as well.
Another relationship that is included under the Minnesota law is the affinity relationship. This is something we are starting to see in some states as a more inclusive definition that allows employees to take leave to care for someone with whom they have a close personal relationship but might not necessarily be an immediate relative. I realize this relationship is very broad, however Minnesota does require some sort of expectation of care between the individual and the employee.
Now we will get into the financial piece of PFML. Minnesota has set the initial rate at 0.7% however this amount is subject to adjustment as we could potentially see some changes prior to everything becoming effective in 2026. The rate is split 50/50 between employers and employees however if employers choose they can cover the employee portion of contributions. Premiums will be capped at the Social Security wage limit so once an employee has paid into the program on earnings up to that amount there are no longer contributions due for that calendar year. This applies to both the employee and employer portion.
Finally, employers with less than 30 employees would be able to invoke a small business exclusion to pay a reduced contribution amount. Here on the slide we have a few examples of what contributions might look like for an employer. For easy math let's say the employer has $1 million in payroll. If the employer has 30 or more employees the 0.7% contribution rate would be a total amount of $77,000. The employer can then split that cost with the employee so each portion comes to $3,500. It gets a little bit more complicated with these employers that are under 30 employees. Using the same annual payroll of $1 million this employer could evoke that small business exclusion to only pay 75% of the contributions. That would lower the $77,000 obligation to $5,250 the employer would need to pay at least 25% of that reduced contribution amount.
Minnesota like many states is using a year benefit calculation and the maximum benefit amount an employee can receive will be capped at the state annual weekly wage. Most states use a two two-tier calculation but Minnesota is actually using three. The first tier will provide 90% wage replacement up to 50% of the state average weekly wage. Employees with additional earnings that are between 50 to 100% of the state average weekly wage will then receive 66% replacement for that second tier. Finally if the employee has additional earnings that are greater than the state average weekly wage the third tier calculation would be at 55% replacement.
The other point I want to make out when discussing an employees benefit payments in Minnesota is that the language does require a 7-Day qualifying period for all types of leave except bonding with a new child. This is not the same as a waiting period that we see in some other states. This qualifying period would be retroactively payable. The 7-Day threshold is just a minimum period of time for which the employee must be seeking benefits and in the cases of intermittent leave, these seven days do not have to be consecutive.
That last slide had a lot of math and different percentages so we wanted to take a minute and break down the information to see what a real life employee example might look like. Here we have Tyler who has an annual salary of $100,000 using the current state average weekly wage which is $1,372 and this amount is likely to change prior to the program rollout in 2026 I just want to point that out. 50% of that state average weekly wage would be $686 so this is what would set the benefit tiers. First, Tyler will receive 90% replacement for the first $686 of his wages. Then he will receive an additional 66% replacement for the next $686. Finally, since Tyler's regular earnings are above the State Average Weekly Wage the third tier will kick in and provide an additional 55% replacement for the remainder of his wages. Combining these three tiers - Tyler's benefit amount would be slightly over the State Average Weekly Wage so he will then receive the maximum benefit of $1,372.
When new state PFML programs are implemented, there are several considerations for employers to keep in mind. In Minnesota employers can opt out of participating in the state program for administration if they want to go with a private plan instead. This can either be self-administered or they could purchase a plan through an approved insurance carrier.
As employers prepare for Minnesota paid family medical leave they need to be looking at the decision as to which plan is best for their workforce. Many employers also offer benefit packages that could be used in coordination with Minnesota PFML benefits. Examples of this might be an existing short-term disability policy or an internal paid parental leave policy.
It's important to understand how these existing benefits will be impacted and then integrate with the new Minnesota PFML program. In those cases where employees could be eligible for multiple types of benefits, keep in mind short-term disability policies are not a replacement for a state PFML program. In many cases the state benefits will be primary so there would be an element of offsetting on other types of benefits.
Finally with employers who have workers in multiple states, changing PFML laws, and compliance can be a lot to manage. Employers who do have Minnesota workers need to identify those individuals and start planning communication strategies to keep their workers informed of the upcoming Minnesota Paid Family Medical Leave program as well as any potential impacts. These employers should also stay up to date with the rule making process prior to 2026.
I personally sign up for the state newsletters and regularly visit that Minnesota PFML website as these are great resources for information and updates. Thank you all very much for taking the time to join me today to discuss Minnesota Paid Family and Medical Leave. We hope this session was helpful and Mutual of Omaha will continue to monitor the Minnesota program as additional information is released.