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Tuesday, 20 February 2018 11:24

FMLA Tax Credit 2018

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The Family and Medical Leave Act of 1993 (FMLA) provides employees of companies with 50 or more workers up to 12 weeks of protected unpaid leave annually for their own serious health condition, for the adoption or birth of a child or to care for a spouse, child, or parent who is ill. On December 22, 2017, the Tax Cuts and Jobs Act was signed into law, creating a federal tax credit for employers providing paid family and medical leave beginning in 2018 and ending at the end of 2019.

 

As stated in the tax act's Section 13403, Employer Credit for Paid Family and Medical Leave, eligible employers can claim a general business credit equal to a percentage of wages paid to qualifying employees on leave under the Family and Medical Leave Act (FMLA).  Here are the details:

  • To receive the credit, employers must provide at least two weeks of leave and compensate workers at a minimum of 50% of their regular earnings. The two weeks of paid leave cannot be provided as vacation, personal, medical, or sick leave. Until paid time off that may be applied against FMLA leave is exhausted, the credit will not apply.
  • The credit will range from 12.5% to 25% of the cost of each hour of paid leave, depending on how much of a worker's regular earnings the benefit replaces. The government will cover 12.5% of the benefit's costs if workers receive half of their regular earnings, rising incrementally up to 25% if workers receive their entire regular earnings.
  • Employers can only apply the credit toward workers who have been employed at the organization for at least a year and who were paid no more than $72,000 for 2017 (this wage ceiling will be adjusted for inflation going forward). 
  • Both full-time and part-time workers, if employed at the organization for at least a year, must be offered paid leave for an employer to be able to claim the tax credit. Employers must allow part-time employees to take a commensurate amount of paid leave, determined on a pro-rated basis.
  • To be considered for the tax credit, the paid family and medical leave must be a separate, written provision in the employer's policies. Employers that provide paid family and medical leave for employees who aren't covered under FMLA also must include a non-retaliation provision in the policy, meaning that employees won't be penalized for taking paid leave.
  • The credit does not apply with respect to paid leave that is mandated under state or local law. If the paid FMLA time off is being provided in compliance with a state law that mandates paid medical or family leave, the credit is unavailable for that time off.

The IRS and the Treasury Department have yet to post official guidance regarding the credit. It may take a while to get the logistics in place for tracking who is eligible and for employers to calculate the potential tax credit. Now is a good time for employers to ensure they have the proper compliant written policies in place and review state and local leave legislation to ensure that there are no conflicts with the leave-credit program. 

If you have employees working in New York state, you should be aware of some recent changes to the New York state FMLA law.  Click here for more information.

Your Fall River Account Manager can assist with getting these policies in place. Contact us today!

Sources:

https://www.ny.gov/programs/new-york-state-paid-family-leave

https://www.ny.gov/new-york-state-paid-family-leave/paid-family-leave-information-employees

https://www.ny.gov/new-york-state-paid-family-leave/paid-family-leave-frequently-asked-questions

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/how-tax-bill-alerts-employee-benefits.aspx

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/taking-advantage-of-paid-leave-tax-credit.aspx

Read 880 times Last modified on Tuesday, 27 February 2018 13:56
Juliet Fitzgibbons

Juliet joins Fall River as an Account Executive and brings over 15 years of prior broker and account management experience. Her experience brings extensive knowledge on employee benefit programs, account management and creative cost-saving strategies and compliance solutions for employers of various sizes.

She is responsible for new business proposals, client renewals including plan benchmarking, rate analysis and mid-year reviews. She helps clients navigate healthcare systems and educates employers and employees through open enrollment meetings and day-to-day service requests. Juliet joined Fall River in 2015.