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ARTICLE · 04 FEBRUARY 2025

Employers Who Administer PFML Programs Get Much-Needed Guidance From IRS

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The Guidance clarifies the federal income and employment tax treatment of contributions and benefits under state-funded PFML Programs.

United StatesEmployment and HR
Melissa Ostrower
Melissa Ostrower
Jenifer M. Bologna
Jenifer M. Bologna

Takeaways

  • The Guidance clarifies the federal income and employment tax treatment of contributions and benefits under state-funded PFML Programs.
  • It does not apply to privately insured or self-insured arrangements.
  • Affected employers should work with their in-house finance and payroll teams to ensure that payments into the funds are treated consistent with the Guidance and that employee payments and employer pick-up payments are properly reported as taxable wages (taking into account the 2025 transition guidance).

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In response to taxpayer and state government requests, including a 2024 letter from governors of nine states imploring the Internal Revenue Service (IRS) to clarify the federal tax treatment of premiums and benefits under state paid family and medical leave programs (PFML Programs), the IRS issued Revenue Ruling 2025-4 (Guidance) which clarifies the

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