Maryland Paid Family Leave Employer Contributions Begin This Year – What Employers Need to Know and Expect
In 2022, the Maryland General Assembly passed the Time to Care Act of 2022 (the “Act”), setting up a paid family and medical leave program for Maryland employees. Through Family and Medical Leave Insurance (“FAMLI”), eligible Maryland employees may receive up to 12 weeks of paid family and medical leave for the various reasons detailed below. FAMLI will be funded by both employer and employee contributions. Though eligible employees are not able to draw from the fund until January 1, 2026, required contributions are currently scheduled to begin on October 1, 2024. Therefore, Maryland employers should begin planning for implementation of the program and ensure that employees have advance notice of the upcoming deductions from their wages related to FAMLI.
How Is the Program Funded?
Paid leave provided through the Act will be funded through payroll taxes. The Maryland Department of Labor has currently set the initial contribution rate to 0.90% of an employee’s covered wages, up to the social security taxable wage base (currently $160,200). The initial contribution rate will remain effective until June 30, 2026 and will thereafter be reassessed annually. These contributions will be divided equally between employees and employers (with each paying 0.45%), however, employers may voluntarily elect to pay more than half of the required contribution if they so choose. Employers with 14 or fewer employees do not have to contribute, but must withhold the employee portion of the tax from employee wages (0.45%). Program contributions may not exceed 1.2% of an employee’s wages.
Covered Employers
Employers with at least one employee in Maryland are covered. However, only employers with 15 or more employees in Maryland will be required to contribute to the FAMLI fund.
Covered Employees
The Act covers Maryland employees who have worked 680 hours or more in the 12 months preceding the leave.
What Are Qualifying Reasons for Taking Leave?
Eligible employees can receive up to 12 weeks of paid family and medical leave for the following reasons: (1) to care for or bond with a newborn child or child newly placed for adoption, foster care, or kinship care; (2) to care for a family member with a serious health condition; (3) to attend to the employee’s own serious health condition; (4) to care for a next of kin military service member with a serious health condition resulting from military service; and (5) to attend to “qualifying exigencies” arising out of a family member’s deployment to military service. Employees may receive up to 24 weeks of leave in a 12 month period in the event the employee welcomes a new child and during the same year also experiences a serious health condition.
Employees can receive a weekly wage of up to $1,000, with the exact amount determined based on how the employee’s average weekly wage compares to the state average weekly wage.
How Can Employers Prepare?
Employers will be automatically enrolled in FAMLI unless they provide a comparable private plan for their employees, which will need to be approved by the Maryland Department of Labor. Unless a private plan is approved, beginning October 1, 2024, employers will be required to begin making contributions. Accordingly, qualifying Maryland employers should prepare in the following ways:
- Begin identifying eligible employees.
- Prepare written notices to employees regarding employee rights and duties under the Act. These notices should be provided to eligible employees six months before benefits begin, as well as (i) at the time of hire, (ii) once per year, (iii) when an employee requests paid leave, and (iv) when the employer is aware that an employee’s leave request may qualify.
- Prepare to update the payroll system to withhold each employee’s contributions from their wages and to contribute the employer portion.
- Consider whether you want to cover more than the required contribution of 0.45%.
- Evaluate whether you may need policy and handbook changes.
- Consult counsel if you have questions regarding current paid time off, leave of absence, and family and medical leave policies to account for these new requirements.
On January 24, 2024, the Maryland general assembly proposed legislation to further modify the Act, including moving the implementation dates back further, so the timeline may change. We will continue to monitor and provide updates on any changes or updates.
