An Act To Amend The Laws Governing Paid Family And Medical Leave

132nd Legislature (2025-2026) Introduced by Kristen Cloutier and 1 co-sponsor

LD 894 makes Maine PFML benefits taxable starting Jan 1, 2026, affecting beneficiaries and boosting state revenue.

Signed by Governor

#employmentpractices #familyandmedicalleave #leave

Purpose

LD 894 amends Maine’s paid family and medical leave (PFML) law to (1) change the tax treatment of PFML benefits and (2) provide refunds/reimbursements to certain employers with approved private plans. The bill also includes implementation provisions for the Department of Labor and contains provisions that were considered during amendment deliberations that could affect eligibility timing and benefit outlays.

Key provisions (as reflected in fiscal notes and enacted amendments)

Taxation of PFML benefits: Family and medical leave benefits paid under the program are subject to state income taxation effective January 1, 2026. The fiscal analysis projects additional state revenue from this change.

Employer reimbursements / refunds: The Department of Labor will reimburse certain employers who remitted premium contributions to the Paid Family and Medical Leave Insurance Fund on or after January 1, 2025 and who received approval to substitute a private plan before January 1, 2026. The Department estimates these reimbursements will reduce PFML fund revenue by about $25.0 million in FY 2025–26 and $30.0 million in FY 2026–27.

One-time administrative allocation: The bill provides a one-time PFML Insurance Fund allocation of $20,000 (FY 2025–26) for the Department of Labor to calculate and issue refunds to eligible employers.

Court filings / enforcement: The bill may lead to a small increase in civil suits related to PFML; projected increases in filing fees are minor.

Eligibility-related proposals considered: Some amendments considered (noting fiscal impacts) would require employees to work 120 days before PFML eligibility, potentially lowering benefit payouts; fiscal effects of that change were not fully estimated in initial notes.

Fiscal impact (selected figures)

General Fund revenue increase from taxation: $817,000 (FY 2025–26); $4,170,500 (FY 2026–27).

Local Government Fund increase: $43,000 (FY 2025–26); $219,500 (FY 2026–27).

PFML Insurance Fund reductions due to reimbursements: ($25.0 million) FY 2025–26; ($30.0 million) FY 2026–27.

One-time PFML appropriation: $20,000 (FY 2025–26) to Dept. of Labor.

Who is affected

PFML beneficiaries: benefits become state-taxable beginning 1/1/2026.

Employers with private PFML plans approved before 1/1/2026: eligible for premium refunds for contributions remitted on/after 1/1/2025.

Paid Family and Medical Leave Insurance Fund: large near-term revenue reductions from employer reimbursements.

Department of Labor: small, absorbable administrative costs plus a small one-time allocation.

State and local governments: modest revenue increases from state taxation of benefits.

Legislative timeline/highlights

Referred to Labor Committee (Mar 5, 2025); work sessions and divided committee reports in May 2025.

Passed both chambers in early June 2025 (close roll-call votes).

Sent for concurrence June 9, 2025; signed by Governor June 12, 2025.

Note: This summary is based on enacted language and accompanying fiscal notes. For the precise statutory amendments and complete legislative text, consult the enrolled bill and the Office of the Revisor of Statutes.

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