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 September 30, 2025
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This is an official communication from the Colorado Department of Labor and Employment’s
Family & Medical Leave Insurance Division.
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Letter from the Division Director
Dear Colorado Employers,
As part of new IRS guidance, some FAMLI benefits will soon be treated differently for tax purposes. These changes begin in January 2026, and while they don’t require you to take any action this year, we know it’s important to keep you informed early.
Our commitment at FAMLI is to make these changes as straightforward as possible. This special edition newsletter will walk you through what’s changing, and how we’re designing systems to make those changes simple for you.
The most important thing for you to know is: Beginning in 2026, the IRS will require employers with 10 or more employees to cover their portion of Social Security and Medicare taxes (FICA) and federal unemployment taxes (FUTA) on certain FAMLI medical leave benefits. Setting aside funds ahead of time can help you avoid surprises when these federal taxes come due in 2026.
The second most important thing for you to know is: we’re keeping the administrative lift as light as possible. FAMLI will handle withholding the employee portion of FICA taxes, send you semi-weekly notices through mail, email, and MyFAMLI+ Employer, then provide year-end statements with all the details you and your accountant need.
The third most important thing for you to know is: you’ll have plenty of lead time. We’ll continue sharing updates throughout 2025 so you know exactly what’s coming before the new rules take effect in January 2026.
Below, you’ll find an initial overview of the IRS guidance regarding paid leave, and what FAMLI is doing to make that impact as easy to manage as possible. We’ll continue to keep you updated throughout the lead-up to January, and well into the new year.
Thank you for your ongoing partnership in making sure Colorado workers and families can access the leave they need.
Sincerely,
Tracy Marshall
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 Spotlight: New Federal Tax Guidance — FICA, FUTA, & FAMLI Benefits
The IRS has clarified how certain paid leave benefits will be taxed for employers with 10 or more employees. Beginning in 2026, a portion of medical leave benefits (when an employee takes leave for their own health condition, including pregnancy) provided by FAMLI will be treated as a type of taxable wages called “third-party sick pay.”
What This Means For You:
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Employers with 10 or more employees: you’ll be responsible for paying the employer share of FICA and FUTA taxes on benefits distributed to your employees for FAMLI medical leave.
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Small employers (fewer than 10 employees), self-employed individuals, and employees of opted-out local governments: you won’t have medical benefits treated as taxable wages.
No action is required at this time. The IRS has built in a grace period through December 31, 2025; there are no new reporting requirements, withholdings, or forms until January 1, 2026.
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How FAMLI Will Help Manage This Change
How will you know how much tax to pay? We’ll provide timely communication with all the information you need.
Twice-Weekly Notices
Starting January 1, 2026:
- Employers with an HR benefits contact email registered with FAMLI will be sent CSV tables listing the claimant, the taxable amount, and details of the withholdings twice weekly.
- Employers without an HR benefits contact email address registered with FAMLI will be mailed a hard-copy PDF of this information, also twice-weekly.
Note: Make sure you’ve entered a valid HR benefits contact email with FAMLI in order to receive these communications timely and easily via email.
If you don't currently receive communications about claims by email, or you've never received any communications about claims via email, but would like to, call us at 1-866-CO-FAMLI.
Coming Soon: My FAMLI+ Employer Notices
FAMLI is currently working on enhancements to the My FAMLI+ Employer portal to deliver these third party sick pay notices directly to your accounts.
- Account administrators, account editors, and HR benefits administrators will have access to these notices directly in the portal.
- Third-Party Administrators (TPAs) will not receive these notices directly, but your employer account will always have them available.
Whenever a new notice is posted, account contacts will receive an email letting them know and directing them to the portal.
Year-End Sick Pay Statements
Beginning in 2027 for the 2026 tax year, FAMLI will provide each large employer with an annual third party sick pay statement on January 15th. This report will list, for every employee who received taxable medical leave benefits:
- The employee’s name
- Social Security number (last four digits)
- Total third party sick pay the employee received from FAMLI
- Any federal income tax withheld
- Any Social Security tax withheld, and
- Any Medicare tax withheld.
You’ll be able to hand this directly to your accountant or payroll provider to support your IRS reporting.
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Looking Forward: What to Expect Next
With clear guides and early updates, you’ll have time to plan ahead, with no surprises.
Fall 2025 — Early Prep
From now until the new year: FAMLI begins communicating the IRS changes; employers begin educating themselves and preparing for the changes.
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FAMLI: releases new employer toolkit with plain-language guides and calendars; hosts webinars and other information sessions with chamber groups and other business associations.
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Employers with 10+ employees: meet with your tax advisors; attend FAMLI information sessions.
January 1, 2026 — New IRS Rules Begin
On this date: a portion of medical leave benefits for an employee’s own health condition tied to employers with 10+ employees begins to be treated as taxable wages.
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FAMLI: starts withholding the employee portion of FICA for medical leave claims; starts sending semi-weekly notices via mail, email, and potentially via MyFAMLI+ Employer.
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Employers with 10+ employees: begin remitting employer portion of FICA & FUTA taxes to the IRS.
Throughout 2026 — Ongoing Communication
From January 1 of the new year and after: Colorado business owners familiarize themselves with the semi-weekly notices and work with their tax advisors to remit their portion of FICA and FUTA taxes.
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FAMLI: sends semi-weekly notices; files forms 941 (quarterly) and 8922 (annually); holds recurring information sessions.
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Employers with 10+ employees: remits employer portion of FICA & FUTA taxes to the IRS; forwards all relevant FAMLI documentation to tax advisors.
January 15, 2027 — Year-End Statements
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Employers with 10+ employees: receive your first annual sick pay statement for the 2026 tax year.
- This statement lists each employee who received taxable medical leave benefits, plus all withholdings. You can hand this directly to your accountant or payroll provider.
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Questions & Answers
Q: Do I need to budget for this now?
A: Beginning in 2026, employers with 10+ employees will need to cover their portion of Social Security, Medicare, and FUTA on FAMLI medical leave benefits. Talk to your tax advisor today.
Q: How will I know my tax liability?
A: You’ll get semi-weekly notices in your MyFAMLI+ Employer account (or via mail/email). Each notice includes a PDF and (in the case of an email or notice within the portal) CSV table showing claimant names, the taxable portion of benefits, and withholdings. You’ll also receive an email alert whenever a new notice is posted. (For security, emails won’t include claimant details.)
Q: Will this mean more paperwork for me?
A: Very little! FAMLI will do most of the heavy lifting:
- We’ll withhold the employee share of FICA.
- We’ll send you semi-weekly notices with the exact amounts of “third-party sick pay” tied to your business.
- When necessary, FAMLI will file Forms 941 and 8922.
- We’ll provide a year-end “sick pay statement” by January 15, starting in 2027.
Best of all, this is information your accountant or payroll provider can plug directly into your IRS filings.
Q: Do these changes affect all types of leave?
A: No. Only medical leave benefits for an employee’s own health condition (including pregnancy), and only when taken from employers with 10 or more employees.
Q: Is this a new FAMLI cost or premium?
A: No. These are federal tax requirements.
Q: Did FAMLI support this change?
A: These tax rules come directly from the IRS. FAMLI’s role is to make sure Colorado employers and workers can comply with it as easily as possible. That’s why we’re building systems to handle the withholdings, send you regular notices, and provide year-end statements, so you can focus on running your business, taking care of your people, and providing for your communities.
Q: What if my employee works for both a large and a small employer?
A: A portion of medical leave benefits tied to the large employer will be taxable wages. The portion of medical leave benefits tied to the small employer is tax-free. FAMLI will do the math and provide the breakdown in your notices.
Q: What if my employees are in PERA or otherwise exempt from Social Security?
A: If an employee believes too much tax was withheld from a medical leave claim, they can request a refund from the IRS by filing Form 843 with their tax return.
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Closing Thoughts
Our goal is simple: no surprises, and easy change management.
This is the first of several updates you’ll see on the new IRS guidance. Each one will focus on what’s changing, what’s not, and what you need to know next.
Together, we’ll make sure January 2026 is another strong year in everyone’s books. Thank you for your partnership in supporting Colorado families.
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 Come Talk to Us
Have other questions about the IRS Tax Guidance you’d like answered? Need a FAMLI refresher? Help us help you! Ask us for a webinar, presentation, or for more information at cdle_pr@state.co.us.
This month, you can catch us at:
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Add FAMLI to Your Contacts
Make sure to add cdle_famli-alerts@state.co.us to your email contacts. It will help make sure that you hear right away when there is a problem with your account, so we can get it sorted before you face any late fees.
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FAMLI Toolkit
Need a hand navigating FAMLI? Find the required program notice, plus printable guidebooks, handouts, posters, and digital resources below — as well as user guides to make your FAMLI experience as easy as possible.
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Contact FAMLI
The FAMLI Contact Center is open 7:30 a.m. to 4:30 p.m. Monday through Friday. The best time to call is between 7:30 and 10 a.m. You can reach us at 1-866-CO-FAMLI (1-866-263-2654) and for general questions at: CDLE_FAMLI_info@state.co.us.
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