Minnesota Paid Family Leave and Defined Contribution Plan Compensation

Beginning in 2026, Minnesota will implement a paid family leave program (PFL) that provides family leave and medical leave benefits. The State of Minnesota will be requiring employers participating in the State’s program to report PFL medical leave benefits (not family benefits) on the employer’s Form W-2 — and this may implicate the definition of compensation in the employer’s defined contribution retirement plans. Employers should review the definition of compensation in their retirement plan documents to determine whether any action is needed prior to 2026.

Background on Minnesota PFL Taxation

On October 1, 2025, the Minnesota Department of Employment and Economic Development issued guidance on the taxation of contributions to the Minnesota PFL program and distributions from the program. This guidance only applies to employers participating in the PFL program administered by the State of Minnesota and will not apply to a fully insured or self-funded PFL program.

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IRS Issues Final Roth Catch-up Rules and What You Need to Know

On September 16, 2025, the Internal Revenue Service (IRS) published final rules on the Roth catch-up contribution requirements of SECURE 2.0 Act (Final Rules). Many of the requirements from the proposed rules are retained, although there have been some changes to try and ease plan administrative issues.

Background on Roth Catch-Up Contribution Changes

Section 603 of the SECURE 2.0 Act requires catch-up contributions to be made as after-tax Roth contributions if the contributing employee received wages in the prior calendar year that exceed $145,000 (and as adjusted for inflation). The definition of wages is defined as FICA wages. All eligible participants must have the opportunity to elect Roth catch-up contributions (and Roth cannot be limited to just those employees earning above the $145,000 wage limit as adjusted).

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