United States: The Massachusetts Paid Family Leave Self-Funded Private Plan Exemption – What We Know Now

Last Updated: December 4 2019
Article by Patricia A. Moran and Natalie Young

Under the new Massachusetts Paid Family Leave Law, M.G.L c. 175M ("MAPFML"), employees and other covered individuals in the Commonwealth will be entitled to a generous set of new paid leave benefits and rights beginning January 1, 2021. While no benefits are available under the MAPFML until 2021, the first quarterly contributions to the Commonwealth's MAPFML fund (i.e. to cover the period from October 1 to December 31, 2019) must be remitted by employers with 25 or more covered individuals by January 31, 2020. The MAPFML and its contribution and other requirements were covered at length in our earlier post.

Employers, however, may avoid collecting and remitting contributions by establishing a private plan, so long as the private plan provides benefits and rights meeting or exceeding those available under the MAPFML. Many employers are exploring and pursuing this option for a variety of reasons including: cost savings; a reluctance to participate in (and direct employees to participate in) a state plan; a hope to maintain some control over (or at least advance warning of) employee leaves of absence; and a desire to preserve existing practices and policies. Private plans may be either self-funded or fully insured, at the employer's option. We discussed the private plan option at length in our earlier post.

In order to establish a private plan, an employer must apply annually to the Massachusetts Department of Paid Family and Medical Leave (the "Department") for an exemption. An application must be submitted to the Department in advance of the quarter for which the employer is seeking exemption, although for the quarter covering October 1-December 31 2019 only, employers have until December 20, 2019 to apply.

Self-Funded Private Plan Application Process

Although somewhat opaque at first, the self-funded private plan application process has solidified over the past weeks and, based on our experience, currently involves the following steps:

  • Bonding. Self-insured employers must furnish a surety bond running to the Commonwealth. For exemptions effective October 1, 2019, the bonds are "contributions" bonds, meaning that the bonds will allow the Commonwealth to recover MAPFML contributions should an employer fail to maintain the private plan exemption through January 1, 2021. It is anticipated that bonds issued to cover periods after 2021 will allow the Commonwealth to recover both contributions and benefit payments, and will be more expensive than the currently required "contributions" bonds. Surety bond forms with instructions are available here. We are aware of several companies now issuing these bonds.
  • Plan document. When applying, the employer must attach documentation explaining the terms and conditions of the private plan, such as a plan document, summary or policy. For this step, we have prepared comprehensive private plan documents for our clients that have been submitted with MAPFML applications that received approval from the Department.
  • Application. The employer must then submit its application through MassTaxConnect. The employer must answer a series of questions1, and attach a plan document, summary or policy. The employer must also attach its bond (although if the employer has not yet obtained a bond, the employer may submit the application with the bond pending). For ease of the Department's review, we recommend that employers submit the plan document with the bond (if possible).
  • Provisional approval. Shortly after submitting the application, employers who certify compliance in the questionnaire have generally been receiving a "provisional approval" from the Department.
  • Request to complete application file. Shortly after receiving provisional approval, many employers have then been receiving a "request to complete application file", which includes:
    • Bond form and instructions (if the bond has not already been submitted);
    • "Attachment A", which asks the employer to submit additional information about its PFML contributions, private plan administration, workforce count, and surety bond; and
    • "Attachment B", which contains a long list of private plan elements and asks the employer to attest that its private plan meets all of these elements.

Around the same time that employers receive the "request to complete application file", some have also received a courtesy call from the Department updating employers about the application process and alerting them to the "request to complete application file". Please note that, in our clients' experience, the Department has not been providing substantive feedback or answering questions in these conversations.

  • Final approval. Employers who have completed the "request to complete application file" have just recently begun receiving final approval. Currently, the final approvals are provided by a phone call from the Department; official written approvals are not expected until 2020.

What If an Application is Denied?

If a request is denied, an applicant may request review by the Department through MassTaxConnect.

What to do Now?

Employers who wish to apply for a self-funded private plan exemption for the quarter beginning October 1, 2019 should immediately begin the process of obtaining a plan document and bond so that the application may be prepared and submitted by December 20, 2019. Please feel free to contact us directly should you require guidance in drafting a compliant private plan or have questions about the application process.


1 To access these questions, go to the Department's exemptions information page and click on "Review the questions you will be asked during your exemption application."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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