Beginning in January 2021, most workers in Massachusetts will be eligible for up to 12 weeks of paid family leave and up to 20 weeks of paid medical leave. The program will be funded by contributions paid by employees, employers and the self-employed. Contributions to the program will begin on October 1, 2019 and will be managed by the Family and Medical Leave Department (DFML) by MGL c.175M.

For more details on the benefits required by this new law, please visit the DFML website.

Persons covered by the law

Effective October 1, 2019, businesses with at least one Massachusetts employee will be required to remit PFML contributions on behalf of each employee to the Family and Employment Security Trust Fund. The following describes who is covered by the PFML program.

W-2
W-2 employees (full-time, part-time or seasonal) always count as covered persons. Generally, the Massachusetts Unemployment Insurance program eligibility criteria apply to determine eligibility for the PFML. If you are required to report a W-2 employee’s salary to the Unemployment Assistance Department (DUA), that employee must be taken into account. Employees do not need to reside in Massachusetts to be covered.

1099-MISC independent contractors
Workers whose payments are declared on IRS 1099-MISC form (1099-MISC workers) are included in the total number of people covered only if they represent more than 50% of your total headcount (W-2 employees and 1099-MISC workers combined). Otherwise, an employer is not required to contribute or report with respect to 1099-MISC workers.

Payments made to individuals and reported on IRS Form 1099-MISC remain covered by the PFML program. These payments include some of the prizes, awards and other income shown in Box 3; income from fishing vessels reported in Box 5; the medical and health care payments shown in Box 6; the crop insurance products shown in Box 9; and the golden parachute surplus products reported in Box 13. Here you can find additional advice from the IRS regarding IRS Form 1099-MISC payments. The PFML program only applies to people receiving these payments when these people represent more than 50% of a company’s workforce. Information on how a company makes this decision regarding its workforce can be found here.

DFML has determined that all non-employee compensation paid on or after January 1, 2020 and reported in Box 1 of IRS Form 1099-NEC is exempt from the PFML program withholding and contribution requirements. Please note that prior to January 1, 2020, this compensation was reported on IRS Form 1099-MISC. As a result, from October 1, 2019 to December 31, 2019, workers whose payments were to be reported on IRS 1099-MISC form were subject to the PFML program.

Count 1099-MISC Independent Contractors as Covered Individuals

In order for a 1099-MISC worker to be considered part of your Massachusetts workforce, the 1099-MISC worker MUST:

  1. Receive payments reported on IRS form 1009-MISC
  2. Perform services as an individual entity
  3. Living in Massachusetts
  4. Perform services in Massachusetts

Massachusetts Unemployment Act defines independent contractors as workers who this three-part test.

If a worker meets the criteria to be a Covered Person and you have determined that they are not an independent contractor on the three-part test, you should count them as part of your Massachusetts workforce.

Payments made to individuals and reported on IRS Form 1099-MISC are covered by the PFML program. These payments include some of the prizes, awards and other income shown in Box 3; income from fishing vessels reported in Box 5; the medical and health care payments shown in Box 6; the crop insurance products shown in Box 9; and the excess golden parachute products reported in Box 13. Additional IRS guidelines regarding payments can be found on IRS Form 1099-MISC. here. The PFML program only applies to people receiving these payments when these people represent more than 50% of a company’s workforce. Information on how a company makes this decision regarding its workforce can be found here.

Form 1099-MISC

Required contributions

Each quarter, you will be required to submit contributions for all covered persons in your workforce. You can deduct part of the required contribution from the wages you pay to your employees and from the payments you make to 1099-MISC workers who are considered covered persons. An employer can choose to pay the employee contribution in whole or in part. If your workforce has less than 25 covered persons, you are not responsible for paying the employer’s share of the contribution. However, you can choose to cover some or all of the covered persons’ share.

Sharing of contributions

Employers with 25 or more employees must pay DFML a contribution of 0.75% (0.62% for the contribution for sick leave and 0.13% for the contribution for family leave) of the eligible payroll. This contribution can be divided between employee payroll deductions and an employer contribution and will cover both types of leave.

1099-NEC

DFML has determined that all non-employee compensation paid as of January 1, 2020 and reported in box 1 of the IRS form 1099-NEC is exempt from the PFML program holdback and contribution requirements. Please note that prior to January 1, 2020, this compensation was reported on IRS Form 1099-MISC. As a result, from October 1, 2019 to December 31, 2019, workers whose payments were to be reported on IRS 1099-MISC form were subject to the PFML program.