On August 5, 2026, Treasury and the IRS released Notice 2026-28 (announced in IR-2026-86). It is the first real operating guide for the employer credit for paid family and medical leave under IRC §45S after the One Big Beautiful Bill Act (also branded as Working Families Tax Cuts) made the credit permanent and expanded how employers can claim it.
This is a payroll / tax credit topic, not a medical plan design change. It still belongs on the benefits calendar: leave policy, insurance funding, and Form 8994 conversations often sit next to COBRA, FSA, and HSA administration for the same HR team.
What changed in the statute (and what the notice explains)
Under the amended statute, an eligible employer may elect to calculate the credit using either:
- the wage method — wages actually paid to qualifying employees while on family and medical leave, or
- the premium method — premiums paid or incurred for an insurance policy that provides paid family and medical leave during the taxable year.
Notice 2026-28 modifies earlier guidance in Notice 2018-71 and spends most of its pages on the premium method: what counts as “creditable coverage,” how to allocate blended premiums (leave that mixes creditable and noncreditable benefits, or qualifying and nonqualifying employees), and when wage and premium credits can coexist.
Per the IRS release, for leave that qualifies, the general business credit still ranges from 12.5% to 25% of wages paid to qualifying employees for up to 12 weeks of family and medical leave per taxable year. Use the notice (and your tax advisor) for the premium-side math — do not treat a marketing one-pager as the computation.
Eligibility details employers keep getting wrong
From the notice’s background on the OBBBA amendments:
- A qualifying employee is limited to someone customarily employed for not less than 20 hours per week.
- An employer may elect to treat employees as qualifying after six months of employment instead of one year.
- Leave required by state or local law (or paid by a state/local government) counts when deciding whether the employer is an “eligible employer,” but that leave still does not count when calculating the credit amount — and premiums attributable to that mandated coverage are not creditable under the premium method.
- You generally cannot deduct the portion of wages or premiums equal to the credit claimed (see §280C(a) as amended).
- You may use wage method for some leave and premium method for other leave, but not both for the same instance of leave funded by the same premium.
Taxpayers may rely on Notice 2026-28 for taxable years beginning after December 31, 2025, until proposed regulations issue. Comments on the notice are due October 16, 2026 (regulations.gov docket search: IRS-2026-0496).
What employers should do
- Inventory how you fund PFML today — self-funded wages, a commercial PFML policy, a state program, or a blend — before anyone claims a 2026 credit.
- If you buy PFML insurance, ask the carrier for a breakdown that supports a reasonable, contemporaneous allocation of blended premiums (creditable vs. noncreditable).
- Decide whether you will elect the six-month employment threshold and confirm the written policy still satisfies §45S(c).
- Loop in tax counsel / the Form 8994 preparer before open enrollment communications promise “we get the federal leave credit.”
- If the premium allocation or state-facilitated program rules bite your design, submit comments by October 16.
CBA does not claim the §45S credit for you. We do keep leave, coverage loss, and account-plan timing from colliding when someone is out and benefits elections, COBRA clocks, or FSA substantiation are still moving.