MA Payroll 2026: What Changed for Marlborough Employers
If you spent part of this year preparing your payroll system for new PFML tax withholding, you can stop. For calendar year 2026 there are no new employer withholding or reporting requirements for Paid Family and Medical Leave, and no change to employer FICA or FUTA responsibility for PFML benefits (Massachusetts DFML, last updated 29 December 2025).
That is worth stating plainly because the opposite is circulating. IRS Revenue Ruling 2025-4 did say that medical leave benefits attributable to employer contributions are taxable wages, and a lot of guidance was written on the assumption that employers would be reporting and withholding on them from January. Then the timeline moved, and Massachusetts changed its own law to remove the problem. What is left for you to do in 2026 is smaller than the noise suggests — but it is not nothing, and the part that is real is the unemployment rate nobody talks about.
Key Takeaways
- No new PFML withholding or reporting falls on employers in 2026, and employer FICA and FUTA responsibility is unchanged. DFML reports taxable benefits directly to employees on Form 1099-G.
- Medical leave benefits are not taxable at all if you have fewer than 25 employees. At 25 or more, 60% is taxable for income tax purposes.
- Chapter 101 of the Acts of 2026 removes employer contributions for medical leave from 1 January 2027, so medical leave benefits stop being taxed as wages.
- The 2026 SUI taxable wage base is $15,000, and the new-employer rate is 2.42%.
- The experienced-employer range is not one band. It is 0.94–5.24% if you are positive-rated and 7.03–14.37% if you are negative-rated, with nothing in between.
PFML in 2026: what did not change
For calendar year 2026, DFML has confirmed all of the following:
- Medical leave benefit payments are not treated as third-party sick pay.
- There are no new employer withholding or reporting requirements for PFML benefits.
- There is no change to employer FICA or FUTA tax responsibility for PFML benefits.
- Employees may still elect federal and state income tax withholding on taxable benefits.
What is taxable is reported by the Commonwealth, not by you. DFML issues Form 1099-G directly to the employee. Your payroll system is not the reporting channel for this, which is precisely the misunderstanding worth clearing up: a business that has been reconfiguring payroll codes to carry PFML benefit taxability has been solving someone else’s problem.
The under-25 line matters more than it reads. Most Marlborough employers are under 25 covered individuals, and for them medical leave benefits paid to their employees are not taxable at all. The 60% figure that appears in most write-ups is the 25-and-over rule, quoted without its threshold.
Chapter 101 changes the structure from January
The reason the tax problem is receding rather than arriving is legislative. Governor Healey signed Chapter 101 of the Acts of 2026 on 12 June 2026 in response to the IRS guidance. It restructures contributions so that no employer contributions are made for medical leave, which means medical leave benefits are no longer taxed as wages.
DFML sets the 2027 contribution rate on or before 1 October 2026, and that rate will reflect the new structure from 1 January 2027.
Two practical consequences. First, the split between what you withhold and what you contribute changes at the turn of the year, so a payroll configuration set once in 2026 will be wrong in January. Second, the October rate announcement is the thing to diary — it is when the actual numbers land, and it comes before most businesses start thinking about next year’s budget. We covered the federal side of the same collision in our note on the OBBBA payroll changes, including why Massachusetts PFML contributions earn no federal paid-leave credit.
The SUI number that did change
The 2026 Massachusetts unemployment insurance taxable wage base is $15,000, and the rate for a new employer is 2.42%.
The part usually quoted wrong is the experienced-employer range. It is commonly written as “0.94% to 14.37%”, which reads as one continuous band. It is not:
The gap between 5.24% and 7.03% is the whole point. Crossing from positive-rated to negative-rated is not a gradual slide; it is a step, and it happens when the benefits charged against your account exceed the contributions you have paid in. One contested separation can move an account across that line and the rate stays there for years.
There is also a COVID-19 recovery assessment on top. With it included, the effective 2026 range for experienced employers runs from roughly 1.118% to 17.086% — so the figure on your rate notice will not match the base schedule, and that is expected rather than an error.
On a $15,000 wage base the arithmetic is small per head and large per payroll: the difference between the bottom of positive-rated and the bottom of negative-rated is about $914 per employee per year. Across ten employees that is a five-figure swing driven by an account status most owners have never looked at.
Why this lands on Marlborough now
Marlborough has an unusual number of businesses about to hire their first employee.
The Marlborough Economic Development Corporation’s downtown pop-up shop programme returned for its fourth year in 2026, at the corner of Weed and Court streets, with opening weekend on 30 and 31 May. Since launching in 2023 the programme has hosted more than 50 different businesses in its rotating storefronts, funded by a Regional Economic Development Organization grant from the Massachusetts Office of Business Development.
That is the pipeline. A maker or online retailer who tests a storefront for a weekend, then takes a lease, then hires one person, meets every rule above at once — the SUI new-employer rate, the PFML contribution split, and the January restructure — in their first year, with no payroll history to lean on. The new-employer rate of 2.42% is not experience-rated because there is no experience yet, and the first year is when the account habits that decide your rate for the following years get set.
More commercial space is also coming online in the city through mixed-use development, which extends that pipeline into next year.
What to actually do before October
- Stop any work reconfiguring payroll for PFML benefit taxability. It is not your reporting obligation in 2026; DFML issues the 1099-G directly.
- Check your covered-individual count against 25. It decides whether medical leave benefits are taxable to your employees at all, and it is the threshold most summaries omit.
- Diary 1 October 2026 for the DFML rate announcement, then adjust the withholding split before the first January payroll.
- Read your SUI rate notice and find out which side of the line your account is on. Positive-rated and negative-rated are different worlds and the notice says which one you are in.
- If you are hiring your first employee, set the account up before the first payroll rather than after. Retroactive registration is the expensive version of this.
How this was checked
The PFML figures come from the Massachusetts Department of Family and Medical Leave’s own tax guidance for employers, the Chapter 101 detail from the same page, and the SUI figures from the 2026 Massachusetts rate schedule. The Marlborough pop-up programme details come from the Marlborough Economic Development Corporation’s published programme information.
One claim in circulation is not supported and is left out: that employers must reflect new PFML FICA components in payroll for 2026. DFML states the opposite for calendar year 2026. Where a rule was deferred rather than implemented, this article says so rather than repeating the version that was written before the deferral.
Green Books Inc. is a bookkeeping practice — Certified Bookkeeper (CPB), IRS Authorized e-File Agent, and Notary Public. This is general information about published rules, not tax or legal advice, and not a review of your situation. Figures were retrieved on 12 August 2026 and the 2027 numbers are not set until DFML publishes them in October.
Frequently asked questions
We have eight employees. Does any of the PFML tax change affect us?
Barely. With fewer than 25 covered individuals you make no employer contribution toward medical leave, and medical leave benefits paid to your employees are not taxable. Family leave benefits are still fully taxable to the employee for income tax, but the Commonwealth reports that on a 1099-G — you do not.
Our payroll provider told us to prepare for new PFML withholding. Were they wrong?
They were probably describing Revenue Ruling 2025-4 as it was expected to apply, before the timeline moved and before Chapter 101 changed the contribution structure. It is worth going back and asking specifically what they intend to change on 1 January 2027, which is when the split actually moves.
What makes an account negative-rated?
Broadly, more in benefits charged against the account than contributions paid into it. It is not a penalty for one bad year; it is a running balance, which is why a single contested separation can matter for several years afterwards. Your rate notice states your status.
We are opening a storefront in Marlborough. What do we need before the first paycheque?
Registration with the Department of Unemployment Assistance and with DFML, both before payroll runs rather than after, plus the withholding split set up correctly for the year you are in. Getting the registration order right is cheaper than unwinding it — the same argument applies to setting the entity up properly in the first place.
Start with the rate notice
Of everything above, the item with real money attached is the one nobody opens: your SUI rate notice. It tells you which side of the positive/negative line your account sits on, and that single fact is worth more per year than most of the compliance work being done around it.
If you would like someone to go through your rate notice and your PFML setup against your actual payroll, book a consultation. If you are hiring for the first time, payroll setup is the place that starts.