Many Minnesotans claim paid leave benefits, but agency expects demand to taper off

An early spike in applications for the state’s new paid leave program has since tapered off, and applications by the end of the year may match up with pre-launch estimates, according to the state Department of Employment and Economic Development.

DEED, which administers Minnesota’s new paid leave program, earlier this week said it approved nearly 75,000 applications for paid leave from Jan. 1 to June 30 of this year, paying out $598 million in benefits. More than 40% of the total 126,000 applications were rejected, typically due to the lack of proper certification from healthcare providers and other documentation.

Minnesota became the 13th state to launch its own state-run paid family and medical leave program this year, and demand for the benefit skyrocketed in its first few weeks.

Milliman, an actuarial firm, in 2024 projected that the state will approve 131,868 applications for the first year of the paid leave program. The 75,000 applications approved so far this year implies the state could be on track to outpace estimates, but a DEED spokesperson said the number of applications has waned.

Parents who welcomed a child into their home in 2025 were eligible to claim the paid leave benefit in 2026, which is what caused the initial spike in applications. DEED says it now receives about 3,000 paid leave applications per week, with the number continuing to decline about 3% weekly.

“The last six months of the year are likely to look different than the first six months of the year because we are no longer dealing with pent-up demand for leave – so we wouldn’t expect our approval numbers to double between now and the end of the year,” DEED said in a statement.

Payroll taxes paid by workers and employers to fund the program are thus far not matching earlier estimates, though spending on benefits is also on track to come in below forecast. The state collected $344 million in payroll tax payments in the first quarter of the year and expects to collect nearly $1.4 billion in payroll taxes this year.

The 2024 Milliman actuarial analysis projected the state will collect $1.53 billion in payroll taxes in 2026, and it projected the state will pay out $1.46 billion in benefit payments in the program’s first year.

The first six months of the paid leave program show that there’s a significant need for the benefit, said DEED officials.

“We are seeing very robust interest in this program,” said Evan Rowe, a deputy commissioner with DEED, during a virtual press briefing this week.

In the first two weeks of January alone, the agency received 18,000 paid leave applications.

Paid leave grants Minnesota workers up to 12 weeks of family leave and 12 weeks of medical leave per year, capped at 20 weeks in a single year. Employers and workers pay into a fund through a payroll tax, and wages are determined by a wage-based formula — the maximum a person can receive on leave is $1,423 per week.

The payroll tax rate for the first year is 0.88%, which is split between employers and their employees. Most workers pay half, or 44 cents for every $100 in taxable wages. Republicans and their business allies have said the program is expensive and a hardship on small businesses especially.

The state is required to conduct an actuarial analysis each year on the paid leave fund and set the payroll tax rate for the following year.

Rowe said DEED is currently working with an actuary and the agency will announce new 2027 payroll tax rates by the end of the month.

By law, the rate cannot go above 1.1% and the paid leave fund balance must not fall below 25% of total program expenditures.