When Minnesota launches its taxpayer-funded paid family and medical leave program on Jan. 1, it will be the 13th state to offer such benefits — and one of only a few that has built its system from the ground up in the past decade.
Greg Norfleet, the chief architect of the program at the Minnesota Department of Employment and Economic Development, has said he is confident that the new benefits system — one of the most significant new benefit programs in state history — will work as intended on “day one,” though ambitious new state systems have encountered problems as they’ve launched in the past.
Minnesota’s vehicle licensing and title system, MNLARS, was plagued by software issues when it started in 2018. MNsure, the state’s health insurance marketplace, had significant delays due to software issues when it opened for applications in 2013.
Minnesota’s new system appears on track to start on time, and it’s already accepting early applications for parental bonding leave. Though, it’s yet to be seen if claim projections will align with costs.
Other states have had successful paid leave launches, although some have had problems in recent years.
For instance, Maryland passed paid leave in 2022. Its 2025 launch date was delayed two years to 2027 due to issues with costs and organization. Taxes would start in 2027, and payments would be available beginning in 2028 under the current plan.
Washington program’s financial woes
Washington state’s paid leave program has been operating since 2020, but has been plagued by staffing shortages, benefit payment delays and financial troubles.
In September, a state actuarial report found the program could face a $346 million deficit by 2029 and a nearly $1 billion deficit by 2030 under the current tax rate limits.
That comes after the state transferred $200 million to the paid leave fund in 2023 when the account for the program risked running out of money. The extra cash stabilized things and allowed the state to lower the tax to fund it, but didn’t resolve long-term issues.
Currently, the tax rate for Washington’s program is 0.92%. It’ll increase to 1.13% at the start of next year, and is expected to grow until it reaches a maximum of 1.2% in 2027. Once it reaches that projected ceiling, the program will struggle to remain solvent without extra state funding as claims will outpace premiums, according to the report.
Minnesota’s program
Minnesota’s paid leave program will be funded by a new 0.88% payroll tax on most employers. It will be split between employers and employees.
Employers can choose to cover the entire cost of the benefit, but most can charge employees up to about half the amount: 0.44%.
Asked if Minnesota’s program might face a similar fate to Washington’s, Norfleet said Minnesota has the advantage of being the 13th to launch the benefit.
“We know a lot more about the demand for these types of programs than we did even five years ago,” said Norfleet, who developed a similar program for Massachusetts, the eighth state to do so. “We’re starting higher than some other states have started, which I think does give us more financial stability over the longer term.”
Claims outpaced premiums
When Washington started collecting taxes in 2019, a year ahead of its program launch, the premium rate was at 0.4%. That gave the state around $467 million to fund the program at the beginning. But paid leave proved popular and claims quickly outpaced taxpayer premiums.
Around 113,000 people claimed the Washington paid leave benefit in 2020, costing the state around $613 million. By 2023, the number of claims grew to more than 210,000, and the cost doubled to nearly $1.5 billion.
After the Washington Legislature provided the program additional funds, payments and premiums continued to grow. In the 2025 fiscal year, 240,000 claimed the benefit, costing the state around $2 billion — $300 million more than the previous year.
Growth is stabilizing in the program, according to the state’s Department of Employment Security, but deficits still loom. Washington had a population of 7.7 million in 2020 and 8.1 million in 2025. Minnesota, meanwhile, has a population of 5.8 million, up from 5.7 million in 2020.
Washington’s program has a staff of 318 as of 2025, according to a recent legislative report. Meanwhile, Minnesota hired around 300 earlier this year and plans to have a staff of around 400 new state employees for its program.
Why officials say Minnesota’s program will be different
Minnesota’s paid leave launch is different from Washington’s in a few ways. First, there was no payroll tax in the year before the 2026 launch. Instead, the program is seeded by $668 million from the historic $17.5 billion state budget surplus in 2023.
Secondly, the standard premium rate for Minnesota’s program is more than twice what Washington’s was in its earliest years. The starting rate in Minnesota will be a 0.88% payroll tax shared between employers and employees.
Minnesota officials estimate that nearly 132,000 people will apply for the benefit in the first year, and that the state will collect around $1.6 billion to fund it.
The initial estimated tax rate grew from the earlier projection of 0.7% when the Legislature passed the program in 2023. Last year, the House passed a bill boosting collections by about $312 million after a new actuarial analysis found 0.88% would be the most effective initial rate to fund paid leave.
The maximum rate allowed under current law will be 1.1% — down from the original 1.2% when paid leave was first passed in 2023. House Republicans were able to reduce the overall maximum rate by 0.1% as part of a budget deal with the DFL-controlled Senate and Gov. Tim Walz earlier this year.
Groups like the National Federation of Independent Business warned of growing premiums before the program was enacted two years ago.
An early test
One component of Minnesota’s paid leave program is already operating in a sort of “beta” test phase. DEED is currently taking applications for parental bonding leave with certain employers. That early benefit access could expand to a broader group in the coming weeks, according to state officials.
Part of the reason for this is to test a small part of the system before it goes live, but also to help alleviate a large number of parents applying for birth-related benefits at the beginning of the first year, something Norfleet said is referred to as the “baby bump” in paid leave circles.
That’s because if a parent had a child in 2025, they are eligible for benefits in 2026 up until the child’s first birthday. With early access to applications, Norfleet said he hopes DEED can process around 5,000 leave applications before the rest of the program goes live on Jan. 1.
Past the paid leave pilot testing, DEED has held more than 300 public engagement sessions with employers across the state to help them prepare.
Minnesota Chamber’s concerns
The Minnesota Chamber of Commerce has pointed to issues other states, such as Washington, have faced that may be warning signs for Minnesota’s program.
Lauryn Schothorst, who handles workplace issues for the group, said they’ve discussed problems like program rollout and call center staffing with the state.
“DEED is very well aware of our concerns based on experiences in other states like Oregon and Washington,” Schothorst said in a statement. “DEED has said loud and clear that they are also tracking these cautionary tales and have been preemptively working to prevent them. We’ll have to see.”
Their primary concern, however, is the effect new rules and regulations will have on businesses across the state. Schothorst said some of the biggest troubles for businesses will be revising benefits packages and employees on extended leave during workforce shortages.
How it works
Starting in 2026, most Minnesota employers will be required to offer employees 12 weeks of family leave and 12 weeks of medical leave. Annual time off will be capped at 20 weeks.
Events like having a child, a serious illness or caring for a sick family member are eligible for coverage. Supporting a family member called to active duty in the military, responding to personal safety issues and bonding with a child also qualify.
The amount of money workers will qualify for under paid leave will depend on their wages.
Someone who earns less than 50% of the state’s average weekly wage, according to the state Labor Department, would get 90% of their normal pay.
A worker earning more than 50% of the state’s average weekly wage would get 66%. Those earning double the weekly average pay would receive 55% of their regular wage.
A person earning Minnesota’s annual average salary of $71,300 would get $1,075.72 a week in payments from the leave program. DEED has calculators that provide estimates of premiums and weekly payments on its website.
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