Decision Time

Paid Leave is coming. In the next few weeks, all Minnesota employers need to decide how they will provide coverage for their employees. They can choose between a state-run plan or a private insurance policy. Our magazine and website will offer additional information about Paid Leave in the coming weeks. For now, employers need to understand the following:

• The legislature established Paid Leave in 2023 to allow employees up to 12 weeks of paid medical leave and 12 weeks of paid family leave, with a cap of 20 weeks between the two.
• Employees who take approved leave will receive payments to reduce the impact of lost pay during their absence from work. Most workers can expect to receive between 55% and 90% of their usual pay, up to a weekly maximum of $1,423. To qualify, they must have earned at least 5.3% of Minnesota’s average annual wage in the previous year, which is roughly $3,900 for this year.
• To cover the cost of claims, employers must either enter the Minnesota state-run program or obtain private insurance coverage from a state-approved provider. In either case, claims will be reviewed and paid by the third party – either the state or the insurer – not the employer directly.

• Employers are quickly approaching several key deadlines and will need to decide soon which avenue they will take to ensure compliance with the new law. The state of Minnesota’s Department of Employment and Economic Development, which is overseeing implementation of Paid Leave, has indicated that employers that want private plan approvals for a January 1st effective date should submit their private plan applications to the state by November 10th.
• Securing private coverage is a multi-step process for employers. They must submit initial paperwork to the insurance company, and after receiving approval by a private insurance carrier, employers must submit their approval letter through the portal by November 10.
• Benefits experts urge employers to begin the process soon. They also recommend that employers obtain a quote from a private insurer to see if private coverage is cost competitive with the state-run plan. There’s no downside to requesting a quote, and it will provide companies with a point of comparison as they decide how to obtain coverage. It’s also recommended to work with a lawyer with expertise in employment law to ensure companies are legally compliant with the law.

• Companies that choose the state-run plan will begin collecting a .88% payroll tax on January 1. Those with 30 or fewer employees may qualify to pay a lower tax rate. Employers may require employees to pay up to half of the tax – so .44% – but they can also pay the entire amount themselves. Employers will submit their paid leave taxes with their quarterly payroll taxes beginning in April 2026. Those who opt for private coverage will also be required to submit first quarter premium payments in April 2026.
• By December 1, 2025 all employers are required to notify their employees of the Paid Leave program, and whether they will be covered by the state-run plan or through private insurance.

Enterprise Minnesota has been talking with benefits consultants and legal firms to provide information to manufacturers about their obligations and options surrounding Paid Leave. Look for a more detailed article about the topic in the next issue of Enterprise Minnesota magazine. We’ll also pre-publish it on our website in the coming weeks. Check your inbox for notification that the article has been posted.

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