FEDERAL – FEDERAL UNEMPLOYMENT TAX ACT (FUTA) CREDIT REDUCTIONS
Federal Unemployment Taxes (FUTA) are paid by employers to fund the administration of the unemployment system at the State Unemployment Workforce agencies, fund a portion of extended benefits during periods of high unemployment, and to provide loans (Title XII Advances) to state agencies whose State Unemployment Trust Funds have become insolvent and are unable to continue paying benefits to unemployed individuals.

Going into 2025, California and the Virgin Islands both once again had outstanding Title XII balances. As such, these jurisdictions were potentially subject to a reduction in their FUTA Credit for 2025, increasing the FUTA rate from the standard net rate of 0.60% to 1.80% for California, and to 5.1% for the Virgin Islands.  The FUTA tax is paid on the first $7,000 each employee earns for the year.

Since California and the Virgin Islands were once again unable to pay off the outstanding loan balance prior to November 10, they will be subject to these credit reductions. Due to these credit reductions, employers in California will be obligated to pay approximately $126 per employee (up from $105 per employee for 2024 and the normal $42 per employee) and employers in the Virgin Islands will see FUTA tax continuing to increase to the historic high of approximately $357 per employee.

Both California and the Virgin Islands were approved for a waiver of the Benefit Cost Rate (BCR), an additional credit reduction formula that would have further increased taxes for employers in these areas.

Connecticut and New York paid off all outstanding balances, which will ensure that their FUTA tax rate reverts to the standard net rate of 0.60%.

The final FUTA payment for 2025 that applies the FUTA rate (changed due to the reduction in the offset) is due by January 31, 2026.

MASSACHUSETTS – PAID FAMILY AND MEDICAL LEAVE UPDATES

Effective January 1, 2026 the maximum weekly benefit amount available for Paid Family and Medical Leave will increase to $1,230.39, up from $1,170.64 in 2025. Despite this increase, the contribution rate will remain the same.

For employers with 25 or more covered employees, the contribution rate will be 0.88% of employee earnings. Employers are responsible for a minimum of 60% (0.42% of wages) of the medical leave premium and 100% (0.18% of wages) of the family leave contribution. Employers are permitted to deduct up to 40% of the medical leave premium (up to .28% of wages) from employee wages.

For employers with less than 25 covered employees, the contribution rate is 0.46% of employee earnings. Employers are not required to contribute to either family or medical leave; however, they are still responsible for withholding and remitting funds from employee paychecks. Employers may elect to pay a portion or all of the employee share, but it is not required for those with less than 25 covered employees.