If you run a business in Maryland with at least one employee, there is a major regulatory wave coming that you cannot afford to ignore.
Last Friday, we hosted a live webinar with payroll expert Mike Taylor from Payroll Vault and Brooks Wright from ShelterPoint Insurance to break down the upcoming Maryland Paid Family and Medical Leave (FAMLI) program.
We know how overwhelming state mandates can be when you are already busy running a company. This guide is designed to translate the complex rules into plain, jargon-free English so you can make the best decision for your business before the deadlines hit.
1. What is the Maryland FAMLI Program?
At its core, FAMLI is a state-mandated insurance program designed to provide employees with paid time off for serious personal or family life events. Eligible employees can take up to 12 weeks of paid leave in a 12-month period, which can scale up to 24 weeks if they need to combine medical leave with family leave.
While on leave, employees can receive up to a maximum benefit of $1,000 per week (starting in 2028), which is indexed annually to Maryland’s average weekly wage.
The program covers two main categories of leave:
Family Leave
- Bonding Leave: For the birth, adoption, or foster placement of a child (which typically accounts for about 40% of all leave claims in other states).
- Caregiver Leave: Caring for a family member with a serious health condition. Maryland has expanded the definition of “family member” to include your spouse, siblings, children, grandchildren, parents, grandparents, in-laws, and domestic partners.
- Military Exigency: Helping a family member prepare for deployment or spending time with them while they are home on military leave.
Medical Leave
- Your Own Medical Health: Caring for your own serious health condition. This operates similarly to short-term disability (though they do not “stack” to give double payouts).
2. Does This Apply to My Business?
Yes. If you have at least one employee physically working in Maryland, you are required to participate. Here is what you need to know about eligibility and costs:
- The 680-Hour Rule: Employees (including part-time and seasonal staff) become eligible for benefits once they have worked at least 680 hours over the last four rolling quarters (which averages out to about 13 hours per week).
- Eligibility is Portable: If a new hire worked 680 hours at their previous employer, their eligibility carries over to your business immediately.
- All W-2 Wages Count: The benefit calculations are based on total W-2 wages. This includes tips and overtime—even though tips and overtime are tax-exempt starting this year under recent legislation. (If you missed that update, you can find my blog post about it here: The No Tax on Tips and Overtime Rule: What Business Owners Need to Know)
- Business Owners Can Qualify: If you are a W-2 business owner physically working in Maryland and meet the 680-hour requirement, you are eligible to claim these benefits yourself (though expect a bit of extra administrative scrutiny on owner claims!).
The Cost Breakdown
The state plan is funded by a 0.9% contribution rate on all employee wages.
Under the default plan, this cost is split equally between the employer and the employee:
- Employer Portion: 0.45% of wages
- Employee Portion: 0.45% of wages (withheld from their paycheck like FICA or unemployment taxes)
The Small Business Exemption: If your company has fewer than 15 employees, you are completely exempt from paying the employer’s 0.45% portion. However, your employees must still contribute their 0.45% portion through payroll deductions.
3. The Big Decision: State Plan vs. Private Plan
As a business owner, you are automatically enrolled in the State Plan unless you actively choose to opt out and use an approved Private Insurance Plan instead.
To help you decide which path makes the most sense, here is how the two options compare:
Option A: The State Plan (The Default)
- How it works: You remain enrolled in the state system.
- The Funding: Payroll contributions begin on January 1, 2027.
- The Claims: Employees can begin submitting claims on January 1, 2028.
- The Catch: You are responsible for managing all the quarterly wage/hour reporting and claims administration through the state portal.
Option B: A Private Plan (The Opt-Out)
- How it works: You purchase private paid leave insurance (through a carrier like ShelterPoint) during open enrollment.
- The Funding: You do not pay contributions to the state in 2027. Instead, you must hold the equivalent funds in a separate escrow account during 2027. Once the state approves your policy kit in the summer of 2027, those escrow funds are released back to your business, and private premiums begin on January 1, 2028.
- The Pros: Private insurance carriers handle a massive portion of the reporting burden, help verify claims, and provide dedicated support. Depending on your employee demographics, private insurance quotes can often be cheaper than the state’s flat 0.9% rate.
- The Catch: The state requires the escrow account because they want proof that you actually have the financial backing to support your employees before officially letting you opt out.
4. How FAMLI Integrates with Your Existing Benefits
- Paid Time Off (PTO): Employees can use their accrued PTO to “top off” their FAMLI benefits, as long as the combined payout does not exceed 100% of their normal weekly wage.
- Short-Term Disability (STD): Existing short-term disability policies will be adjusted. FAMLI pays first as the primary benefit, and your STD policy will act as a secondary offset to cover any remaining balance.
- Employee Handbooks: You will need to officially update your company handbooks to reflect your FAMLI policies, including payment obligations and how leave integrates with your current PTO rules.
5. Critical Deadlines & Timeline
Mark these dates on your calendar so your business stays compliant and avoids automatic enrollment:
- September 1 – November 15, 2026: Open enrollment window to request private insurance quotes and submit your “Declaration of Intent to Opt Out” on the state portal.
- January 1, 2027: Official contributions begin for the State Plan, or your Private Plan escrow account must be funded.
- Summer 2027: Private plan policy kits are reviewed and approved by the state, and escrow funds are released back to private-plan employers.
- January 1, 2028: Employees can officially begin submitting claims and taking paid leave. Private insurance premiums begin.
Next Steps: What Should You Do Now?
Don’t wait until November to start thinking about this. If you do nothing, the state will automatically enroll you, and you will miss the opportunity to see if a private plan could save you a full year of premiums in 2027.
- Gather Your Employee Census: To get an accurate quote from a private carrier, you need a basic employee census form.
- Get a Private Insurance Quote: Work with a licensed agent (like Mike Taylor) to run the numbers and see if a private carrier is cheaper or administratively easier than the state portal.
- Review Your Payroll Setup: Make sure your payroll provider is prepared to handle the new withholdings and quarterly hour-reporting requirements.
We Have Your Back (and a Secret Weapon)
Navigating these changing state regulations is exactly why having a proactive backend partner is so important.
Details Matter and Payroll Vault are fully aligned and prepared to handle the payroll withholdings, quarterly wage-and-hour reporting, and compliance transitions for all of our clients.
And here’s our secret weapon: our trusted local payroll partner, Mike Taylor of Payroll Vault, actually spent years working as an insurance broker and still holds his active insurance license! Because of this, he is uniquely qualified to help you bridge the gap between payroll and coverage. He is able to officially broker these private plans for you directly through ShelterPoint.
Why ShelterPoint? Quite frankly, they know this space better than anyone. They have extensive experience managing these exact state-mandated benefits in states like New York, New Jersey, and Colorado. They’ve been through these legislative rollouts before, so they know exactly what they’re doing—meaning you don’t have to figure it out yourself.
By utilizing Mike to broker your private plan through ShelterPoint, you ensure that your payroll deductions, reporting, and private leave insurance talk to each other flawlessly under one cohesive team.
If you want to view our full webinar recording, grab the slide decks, or download the blank Employee Census Form to get a private FAMLI insurance quote, [Click Here to Access Our Shared Resource Folder].
If you’re ready to hand off your payroll and accounting compliance so you can focus entirely on growing your business, Schedule a Discovery Call with Details Matter Today!