New report projects increase in paid family leave cost

Paid Family & Medical Leave Costs Increase

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(KSTP) – The Minnesota Paid Family and Medical Leave program won’t officially begin for more than two years, but a new actuarial study commissioned by the state is showing the payroll tax required to support the program will likely have to go up.

When the bill passed in the last legislative session, the payroll tax was estimated at .70%. An actuarial report by a firm called Milliman projects the first three years will likely require a .78% payroll tax on employers and their employees.

That might not sound like much, but the National Federation of Independent Business (NFIB) says its analysis shows that will be an extra $628 million dollars over three years.

“The main point is workers and small business owners and everybody affected by this program are going to be paying a lot more for it than they were told,” said John Reynolds of NFIB in Minnesota. 

Reynolds told 5 EYEWITNESS NEWS he wouldn’t be surprised by further increases.

“We could be staring at higher and higher payroll taxes until we hit a maximum under the state law,” he said.

The maximum under the Paid Family and Medical Leave Act is a 1.2% payroll tax.

Senator Alice Mann(DFL-Edina) is one of the authors of the PFML Act and is encouraged by the actuarial report.

“The actuarial report told us what we already knew,” she said. “This program is sound and it’s going to be life-changing for Minnesotans.”

Mann also points out the actuarial report is remarkably close to the legislative projection.

“The recommended premium, we had 0.7 in our bill, they recommended 0.78…So we were off by less than 0.1%,” she told 5 EYEWITNESS NEWS.

Still, Sen. Julia Coleman(R-Waconia) says the legislature could lower the cap beneath the current 1.2% to keep the cost to taxpayers from nearly doubling.

“It’s a bit frustrating to me as a Republican because we spent hour after hour on the Senate floor pointing out that this was going to happen,” she said. “There’s nothing preventing us from putting the cap at an even lower rate. Saying, ‘Hey we sold this to Minnesotans saying it was going to be 0.7, we would like to cap it.’”

Mann says she doesn’t support making changes to the program before it even starts.

The Paid Family and Medical Leave Act will give workers up to 12 weeks off with partial pay for either family or medical reasons. There’s a cap of 20 weeks off if a worker uses both categories of leave after the program starts in 2026.