Q & A: Minnesota Paid Leave Check-in: Roadblocks, Realities, and Results

Minnesota’s new Paid Leave program is already changing how employers handle time off, benefits, and compliance—and plenty of organizations still have questions about how it all works in real life.

In this Q&A, we’ve pulled together the most common and important questions from our May 13, 2026 webinar, where our HR & Payroll team teamed up with employment law attorneys from Blethen Berens. We share what we’re seeing so far with employers across Minnesota—what’s going smoothly, what’s been more challenging, and how HR professionals, managers, and business owners can feel more confident working with the program for the rest of 2026 and beyond.

 

Question: Do you recommend stopping PTO accrual on FMLA and MN Paid Leave (and all other leaves) on a continuous basis?

Answer: We think it depends on a number of things – company culture, whether you continue accrual on other leaves, etc. We do think considering stopping PTO accrual during consecutive leaves may make sense to consider. Otherwise, you have someone who is gone for a lengthy period, may or may not be using paid time off benefits, but is growing their bank, so they have more time off when they come back and if it’s true PTO (and thus ESST impacted) that employee can be gone for ESST reasons once they return without you being able to do much about it.

 

Question: Is failure to pay insurance premiums still COBRA qualifying? I’ve received varying advice.

Answer: A recent email we’ve received from the State program suggests that if your policies are clear that if the employee fails to pay premiums while on any leave their coverage MAY be terminated, then it is possible that failure to pay while on MPL could terminate coverage. It’s still not a totally clear “blessing” on doing so, but it’s at least something you could potentially rely on if you have that response from the State.

 

Question: Can the MN PFML effect the hire anniversary date of an employee?

Answer: MPL does not affect an employee’s hire date anniversary.

 

Question: For those getting medical payments with the state plan, will they confirm the amount we need to list on the W-2?

Answer: You will receive benefit paid statements via the Paid Leave Administrator portal.

 

Question: Are election judges and seasonal campground assistants required to pay MN PFML? Previously these people have been 1099 employees not W-2.

Answer: Great question. You can learn more about this in our recent article here.

 

Question: Employees receiving MN PFML need to request hours every week. Do continuous leave employees need to request hours each week or do they automatically get the amount they were approved for? Also, if they come back before the end of the time that was approved do they need to go in and adjust the request?

Answer: An employee on continuous leave should receive an approval that sets their start and end date of leave. They don’t need to report hours unless they are working during that leave when that was not expected/disclosed. If an employee wants to come back early, they are supposed to report that change to the state/equivalent plan, but we would suggest the employer also report the early return.

 

Question: Do employees that retire and their final sick leave pay goes to a Health Care Savings Plan (per our organization’s policy) have to pay the MN paid leave?

Answer: MPL follows the definition of wages as defined by MN Unemployment. Under MN UI, payments for medical and hospitalization expenses, if the payments are made under a plan, including those paid for insurance or annuities or into a fund to provide for eventual payment to the employee, are excluded wages. Therefore, they would also be excluded from MPL to the extent they are contributed to the HSHP.

 

Question: Does the premium change for the owner/CEO of a small business? Our rate is 0.66% as a small business. But when I went to report the non-UI wages to the Paid Leave only account for Q1, the amount that it showed should’ve been collected from this particular person was higher than what was actually collected through payroll.

Answer: This has been a common occurrence. Typically an owner’s wages are higher, tipping that account into the “large employer” classification. We recommend contacting MN Paid Leave to review both accounts and appeal the large employer determination.

 

Question: Can you clarify on what exactly the employee receives for tax documents on medical leave? Is the EE getting both a 1099 and a W2? And to verify, ER pays employment taxes only on the W2 income, which for small employer is 33% if state?

Answer: 

• Family Leave Payments: These payments are not treated as W-2 Wage Income, however, 100% of the Family Leave benefit payment is taxable Federal & State 1099 Income. For those using the STATE PLAN, Paid Leave will issue employees who take Family Leave a 1099 at the end of the year to report the 1099 Income.
• Medical Leave Payments: Part of the Medical Leave payments will be counted as Federal & State 1099 Income and “third-party sick pay” W-2 Wage Income, subject to employment taxes. The taxable amount corresponds to the employer’s required contribution. For large employers on the STATE PLAN, the taxable portion will be 50%, and for small employers, it will be 33%. For employers with a private plan, the taxable portion of medical benefits may be greater than 50% if total premiums exceed the state plan rate of 0.88%.

The remaining portion (attributable to the employee contribution) is excluded from Federal & State 1099 Income and W-2 Wage Income and is not taxable to the employee or employer.

For those using the STATE PLAN, Paid Leave will issue employees a 1099 at year-end to report the Federal & State 1099 Income for medical leave benefits.

Note: Medical Leave benefits received under the STATE PLAN in 2026 will not be treated as “third-party sick pay” W-2 Wage Income and will not be subject to employment taxes. This is subject to change for 2027.

 

Question: If the private plan premium is less than the 0.88%, and premium is split 50/50 between employer and employee, is there a pick up contribution since both are paying less than 0.44%?

Answer: Our understanding is the cost savings from an equivalent plan can be split 50/50 as the intended nature of the program is to share the premiums equally between the employer and the employee, but it doesn’t have to be. The maximum premium to the employee can’t exceed what they would pay under the state program though, if the cost is higher.

 

Question: Do you have information on how to reword the FMLA to looking forward instead of look back. I am a bit confused as to how this would look. Just example of how it differs what wording would need to look like

Answer: Here is a resource – the language is similar to that within the MPL statute.

 

Question: Prior to submitting the premiums to the state for Q1 we had a variance between our payable balance and what the state said we owed. We found the difference to be a mix of wage corrections after reported and rounding since the state calculates the premium on the total of all wages reported. Are employers researching those differences or just paying the state reported amount and writing off the difference?

Answer: We always encourage researching any filing discrepancies to ensure accuracy of records. If your reports are incorrect, you will want to understand why and make any necessary adjustments to the YTD earnings and correct the system settings going forward so the filings are accurate for Q2. If necessary, file any amended returns for other agencies that may be impacted. If the adjustment is truly just for rounding, then yes, it is okay to adjust your accounting records similar to how you may account for the rounding with MN Unemployment. No payroll adjustments are needed for rounding.

 

Question: We started this year as a small business for MPL purposes. Then the owner-employee qualified as exempt for UI so we had to open a separate account. We then received notice for this new owner-employee account that we are a large business. So should we be paying 33% of the premium on all MN employees except the owner-employee and 50% of the premium for the owner-employee?

Answer: Typically an owner’s wages are higher, tipping that paid leave only account into the “large employer” classification. We recommend contacting MN Paid Leave to review both accounts and appeal the large employer determination and apply the small employer rate to both accounts.

 

Question: I have an employee who took 8 weeks straight for bonding leave, then wanted to do the rest of their leave intermittently to exhaust the 12 weeks. Can they submit multiple requests?

Answer: Yes.

 

Question: How does an employee know how much ESST time to use to supplement their Paid Leave to get up to 100% of wages? How does payroll check to make sure that they aren’t receiving over 100% wages?

Answer: If you allow supplemental usage, then when an employee is approved, there should be a discussion about whether they want to use their benefits or not and how much of their benefits they want to use. For continuous leave, you will know the benefit amount each week and then the amount of supplemental pay can be calculated. The employer/payroll will have to be involved in the determination of the amount that will be paid.

 

Question: If the employer pays all of the .88% do you need to report any of this amount on the employee W2 if they do not use it or if they do use it?

Answer: Yes, whether or not the employee receives leave benefits, the employer’s extra premium contribution in excess of .44% is taxable wages to the employee on the state plan and is reportable in Box 14 on the W2. Refer to the slides included in the presentation recap for further clarification.

 

Question: For Firefighters/Paramedics who are on the PERA Fire/Police plan, they only pay Medicare taxes on regular payroll. No Social Security is withheld. Should tax treatment be the same for medical benefit payments paid by our third party?

Answer: Based on the guidance we have received to date, The social security exemption provided through participation in PERA does not extend to benefits paid by the State or third-party payers, therefore they are subject to Social Security tax at the employee and employer level.

 

Thanks again to everyone who joined us and shared their questions and experiences. Minnesota’s Paid Leave program will keep evolving, and so will the challenges and best practices that come with it. We hope this Q&A gives you clearer, more practical direction as you navigate the rest of 2026 and beyond. Keep checking in with your HR, payroll, and legal partners as new questions pop up, and stay tuned for future updates and resources as we learn more from employers across the state.

Please don’t hesitate to reach out to our team at info@abdosolutions.com if you have questions or would like to learn more about how our HR & Payroll advisors can guide your organization through Minnesota Paid Leave.