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Senate approves accounting change for paid family medical leave fund to avoid new tax liabilities
Summary
Senate Bill 1520 passed to allow the Employment Department to separate employer and employee contributions within the paid family medical leave trust fund; sponsors said the change avoids an estimated $10 million in annual IRS taxes and does not change contribution rates.
The Oregon Senate approved Senate Bill 1520, which the sponsor described as a technical accounting change to the administration of monies in the Paid Family Medical Leave Insurance Fund.
Senator Heaton told colleagues the measure would create two separate buckets within the trust fund — one for employer contributions and one for employee contributions — in order to avoid IRS taxation on amounts treated as employer-paid medical benefits. Heaton said the change does not alter the sixty-forty split between employers and employees that funds the program or the statutory 1% cap, and that it aims to avoid roughly $10,000,000 a year in additional tax liability. "About 60% comes from the employees," Heaton said, and the adjustment would rely on that split to keep the employee-paid medical leave portion from being taxed as an employer benefit.
There was limited floor debate; the bill was carried to a vote and the Senate declared SB 1520 passed with a constitutional majority. Sponsors described the measure as a common-sense approach to avoid new employer or fund-level tax burdens without changing benefit calculations or contribution caps.
