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Colorado FAMLI Issues Tax and Reporting Guidance - HR ALERTS

Updated: Oct 6

Colorado FAMLI Issues Tax and Reporting Guidance

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Effective: January 1, 2025 (Note: RETROACTIVE to all of 2025)

Colorado’s Family and Medical Leave Insurance (FAMLI) Division released updated guidance on September 30, 2025, in response to the IRS’s new Revenue Ruling 2025-4. The IRS clarified how Paid Family and Medical Leave (PFML) programs, including Colorado’s FAMLI, must be handled for federal tax and reporting purposes starting January 1, 2025.


Key points for employers:

  • Employee FAMLI premiums are taxable wages; must be reported on Form W-2.

  • Employer FAMLI premiums are NOT taxable wages for employees.

  • Employer pick-up of employee share becomes taxable compensation.

  • Benefits: Generally taxable income. Medical leave benefits are subject to FICA and FUTA; family leave benefits (bonding and caregiving) are not.

  • 2025 is a transition year with enforcement of the new federal reporting and withholding rules beginning January 1, 2026.



Colorado FAMLI updates:

  • Premium rate stays 0.9 % for 2025 but will drop to 0.88 % in 2026.

  • Employees can opt in to 10 % federal tax withholding on benefits.


State plan administration:

FAMLI will withhold the employee share of FICA, send semi weekly “third party sick pay” notices, file Forms 941 and 8922 when needed, and provide a year end sick pay statement by January 15 (starting in 2027).


Private plans:

These IRS tax rules are expected to apply, but FAMLI has not yet confirmed. Employers with approved private plans should review their plan agreement to determine who handles FICA withholding and reporting.



Next steps:

Vida HR is working with iSolved to confirm system changes and reporting updates. This is the information available today; additional clarifications are expected and will be shared as soon as they are released.



(This update is for informational purposes only and not legal or tax advice.)

Get day-to-day updates on Colorado FAMLI Issues Tax and Reporting Guidance visit the Vida HR Knowledge Center (Vida HR Clients Exclusive).

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