Below is the third article in our series covering the employee benefits-related changes contained in the Tax Cuts and Jobs Act signed by the President on December 22, 2017.

The Act provides employers with a welcome tax credit for offering paid family and medical leave to employees – at least for 2018 and 2019. If your company voluntarily offers paid family and medical leave to rank and file employees or is considering offering such paid leave, read on!

New section 45S of the Internal Revenue Code provides a tax credit to employers that voluntarily offer up to twelve weeks of paid family and medical leave annually to qualifying employees pursuant to a written policy.  To enjoy the tax credit, the leave benefit amount need not be equal to the employee’s normal pay, but must be at least 50% of that amount.  The amount of the tax credit is 12.5% if the leave benefit amount equals 50% of normal pay.  The 12.5% credit increases incrementally (up to a maximum of 25%) to the extent the leave benefit exceeds 50% of normal pay.  A qualifying employee is one who has been employed by the employer for at least a year and who is paid no more than 60% of the “highly compensated employee” dollar amount on an annual basis (i.e., $72,000 for 2018).

To claim the tax credit, the written policy must provide full-time qualifying employees at least two weeks (annually) of paid family and medical leave and must provide part-time qualifying employees a proportionate amount of paid family leave (based on the part-time employee’s expected work hours). The policy must also specify the leave benefit (i.e., at least 50% of normal pay).  Employers that provide paid family and medical leave for employees who aren’t covered under the Family and Medical Leave Act also must include a non-retaliation provision in the policy.  Note that the credit does not apply with respect to paid leave that is mandated under state or local law.

Congress must revisit the paid leave credit in two years, so the tax credit might not motivate employers who are not already voluntarily offering paid family and medical leave to start doing so.

If you would like assistance drafting or revising your company’s paid leave policy to qualify for the tax credit, contact the Jackson Lewis attorney with whom you normally work.

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Photo of Monique Warren Monique Warren

Monique Warren is a Principal in the White Plains, New York office of Jackson Lewis P.C. Ms. Warren is a member of the Employee Benefits Counseling, Executive Compensation, Benefits Litigation and Workplace Privacy Practice Group.

Ms. Warren counsels employers on employee benefits compliance…

Monique Warren is a Principal in the White Plains, New York office of Jackson Lewis P.C. Ms. Warren is a member of the Employee Benefits Counseling, Executive Compensation, Benefits Litigation and Workplace Privacy Practice Group.

Ms. Warren counsels employers on employee benefits compliance and administrative matters, drafts plan documents and employee communication materials, and represents employers to government agencies and in employee benefit litigation. Her expertise includes health and welfare plans as well as retirement plans.

Ms. Warren has spoken at numerous client and professional association events including SHRM and WEB meetings. She also has presented numerous seminars on employee benefits compliance topics including benefits basics for human resource professionals, HIPAA privacy and security, 409A requirements, and annual legal updates.

Prior to joining the firm in 2006, Ms. Warren was a member of the employee benefits group of a large Chicago law firm and later maintained her own practice in Illinois, representing employers in employee benefits, employment and employment-related immigration matters. While attending law school, she was an intern in the tax clinic at Loyola University Chicago School of Law and was a judicial extern for the Honorable Blanche Manning, Federal District Court, Northern District of Illinois. As a law student, she received academic honors and was a member of the moot court employment law team.

During the ten years prior to attending law school, Ms. Warren directed human resource functions in manufacturing and research enterprises. She was certified as a Senior Human Resource Professional by SHRM in 1996.