Federal Tax Credit for Employer-Provided Paid Family and Medical Leave

The Tax Cuts and Jobs Act (Act) includes a new federal tax credit for employers that provide paid family and medical leave (FML) to their employees.

To be clear, the Act does not require employers to provide paid leave. However, eligible employers are allowed a tax credit based on wages paid to employees on FML. If the employer provides paid leave as vacation leave, personal leave, or medical or sick leave, then that leave will not be considered FML for purposes of the tax credit.

The tax credit would apply to employers who have a written policy that provides:

·    Qualifying full-time employees with at least two weeks of annual paid FML;

·    Qualifying part-time employees with an annual paid FML amount that is at least proportionate to the full-time employees’ annual paid FML amount; and

·    A rate of pay not less than 50 percent of the wages normally paid to employees for services performed.

The tax credit would apply to an employer’s qualifying employees who are:

·    Employees as defined under Section 3(e) of the Fair Labor Standards Act of 1938, as amended;

·    Employed by the employer for one year or more; and

·    Not compensated in excess of 60 percent of the amount for highly compensated employees for the preceding year (for example, in 2018, employers may only apply the credit toward employees who earn less than $72,000).

For employers who meet the above criteria and who pay 50 percent of wages, they may claim a tax credit of 12.5 percent of wages paid for up to 12 weeks of FML annually. For each percentage point increase above 50 percent of wages paid, the employer may increase the tax credit by a 0.25 percentage point (not to exceed 25 percent).

The tax credit would apply to wages paid to employees on FML in taxable years beginning after December 31, 2017, and before January 1, 2020.




The UBA Compliance Advisors help you to stay up to date on regulatory changes to help simplify your job and mitigate compliance risk.

This information is general and is provided for educational purposes only. It reflects UBA’s understanding of the available guidance as of the date shown and is subject to change. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.


Recent Insights

May 13, 2018
monthly webinar

Webinar Alert: What Employers Need to Know about Filing Form 5500

Join us for our monthly webinar on Tuesday, May 15, 2018 at 2:00 p.m. ET / 11:00 a.m. PT Register here. This webinar will provide an overview of the Employee Retirement Income Security Act (ERISA) Form 5500 requirements, including whether an employer/plan sponsor must file and what to do if an employer/plan sponsor fails to file. The […]
Read more
April 30, 2018
compliance alert, Health Savings Account, IRS

$6,900 Re-Established as 2018 HSA Contribution Limit for Certain Individuals

The Internal Revenue Service (IRS) has re-established $6,900 as the 2018 health savings account (HSA) contribution limit for individuals with family coverage under a high deductible health plan (HDHP).  This limit was previously announced as $6,900 in May 2017, but was revised to $6,850 in March 2018 due to an inflation adjustment provision in the Tax Cuts and Jobs […]
Read more
April 4, 2018

March 2018 Compliance Recap

March 2018 March was a quiet month in the employee benefits world. The Internal Revenue Service (IRS) released a bulletin that lowered the family contribution limit for health savings account (HSA) contributions. The U.S. Department of Labor (DOL) updated its model Premium Assistance Under Medicaid and the Children’s Health Insurance Program notice (CHIP notice). The […]
Read more
March 19, 2018

2018 Annual Benefit Plan Amounts *Updated

If you would like a printable version of this guide, please email info@bimgroup.us and we will gladly forward one to you.   Contribution & Benefit Limits 2017 Limit 2018 Limit Section 401(k), 403(b), or 457(b) annual deferral $18,000 $18,500 SIMPLE plan annual deferral $12,500 $12,500 Section 415 maximums Annual benefit from defined benefit plan $215,000 $220,000 Annual additions to […]
Read more