The Department of the Treasury and the Internal Revenue Service (IRS) have issued Notice 2026-28, providing crucial guidance on the employer credit for paid family and medical leave (PFML) under the Working Families Tax Cuts (WFTC). This legislation permanently expands and enhances eligibility and coverage for businesses offering PFML benefits to their employees.
Treasury Secretary Scott Bessent emphasized the importance of the WFTC, stating, "Hardworking Americans should not have to choose between caring for a loved one and earning a paycheck." He added that the permanent expansion of the federal PFML Tax Credit offers businesses, particularly small businesses, greater incentives to provide paid leave, allowing workers to care for family or recover from illness without financial insecurity. IRS Chief Executive Officer Frank J. Bisignano said that the changes encourage businesses to provide paid leave and make more employers eligible for the credit.
The WFTC permanently expands the employer tax credit, incentivizing businesses to offer up to 12 weeks of paid leave for employees recovering from serious health conditions or caring for family members. Key improvements include expanded eligibility for employees with six months of service and part-time employees working 20 or more hours weekly. Coverage is also expanded to include insurance premiums for leave, in addition to wages paid during leave, with state and local mandates counting towards eligibility.
Beginning in 2026, employers can claim the credit for premiums paid for PFML insurance policies. Notice 2026-28 details the new premium-based method, comparing it to the wage-based method, and explains how to allocate qualifying premiums and elect between the two. Forthcoming proposed regulations will offer comprehensive guidance, and the Treasury and IRS are requesting public comments on all aspects of the notice.