Minnesota’s new HR and benefits mandates are now in effect: what small businesses need to know

Small business owners across Minnesota are now operating under a new wave of HR and benefits mandates that officially took effect on January 1, 2026. With both the Minnesota Paid Family and Medical Leave program and the MN Secure Choice Retirement Program now active, businesses must ensure their policies, systems, and processes are fully aligned with state requirements to remain compliant.

Here’s what’s now in effect, and what Minnesota employers should be doing to stay ahead.

Minnesota Paid Family and Medical Leave (PFML): what it means for businesses

Minnesota’s PFML program, passed in 2023 and now fully in effect as of January 1, 2026, provides eligible employees with up to 20 weeks of paid leave annually for qualifying medical or family needs. This includes up to 12 weeks for personal medical leave and up to 12 weeks for family-related leave.

Key employer responsibilities now in force:

• Payroll contributions began January 1, 2026, funded by a 0.88% tax split between employers and employees (subject to the Social Security wage cap).
• Quarterly wage reporting requirements began October 31, 2024, and continue regardless of whether employees use the benefit.
• Employee notices were required by December 1, 2025.
• Updated leave policies must now be active to prevent conflicts and ensure compliance with PFML regulations.

For the most up‑to‑date information, please visit the MN Paid Leave Resources page for employers.

Who’s covered by PFML?

All Minnesota employers, regardless of size, must participate. Workers are eligible if they earned at least 5.3% of the state’s average annual wage (around $3,500) in the prior year.

What employers should be doing now:

• Coordinate existing policies like PTO, short‑term disability, and FMLA to avoid leave‑stacking or double coverage.
• Evaluate scheduling flexibility and prepare for intermittent leave usage, which may introduce operational challenges.
• Ensure payroll systems are updated and managers are trained on compliance, eligibility, and documentation requirements.

These steps help ensure your business remains compliant while supporting employees effectively. Consult your Human Resources team and Tax Advisors to confirm your implementation plan is complete and accurate.

MN Secure Choice Retirement Program: the mandate is now active

As of January 1, 2026, Minnesota businesses with five or more W‑2 employees aged 18+ are required to offer access to a retirement savings plan. While employer contributions are not required, employers must facilitate enrollment or risk penalties and audits.

State option: MN Secure Choice

• Offers traditional and Roth IRA plans
• Employees contribute through payroll deductions
• No direct employer cost, though administrative responsibilities fall on the business
• Estimated 7 hours/week of admin time, including managing contributions, updating records, and reporting

Private option: 401(k)

• Higher contribution limits (up to $23,500, plus $7,500 catch‑up for those 50+ in 2024)
• Potential tax credits of up to $16,500
• Employers may work with third‑party administrators to manage compliance
• Typical costs range from $280–$750/month, with credits potentially reducing net cost to near zero for smaller businesses

Businesses may also consider outsourcing administration through vendor‑integrated solutions to streamline compliance. The right choice depends on your business structure and needs.

Why these mandates matter

Failure to comply with PFML or MN Secure Choice can expose your business to civil fines, lawsuits, and reputational damage. Ensuring you are following these mandates not only positions your business for compliance, but for long term success.

Investing in benefits like paid leave and retirement access helps attract and retain talent in a competitive labor market and supports long‑term business stability.

Action plan for 2026

Even though the mandates are now active, it’s not too late to tighten your compliance strategy:

• Review your current HR and benefits policies
• Work with your CPA or advisor to compare retirement plan options
• Confirm payroll systems are correctly handling new tax deductions
• Continue communicating changes to your team clearly and consistently
• Train managers and HR staff on PFML and retirement plan obligations
• Sign up for MN PFML email updates here
• Review all policy changes with your legal advisors to ensure full compliance

With the mandates now in effect, proactive management will help you avoid costly missteps and create a stronger, more supportive workplace for your team.