Other Federal Agency Updates
IRS Issues Guidance on PFML Tax Credit
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APPLIES TO Employers Eligible for the Section 45S PFML Tax Credit |
EFFECTIVE AUG 5, 2026 |
QUESTIONS? Contact HR On-Call |
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Discussion
On August 5, 2026, the Internal Revenue Service (IRS) issued Notice 2026-28, providing initial guidance on the premium-based method for calculating the employer credit for paid family and medical leave (PFML) under Internal Revenue Code Section 45S. The premium method was added by the One Big Beautiful Bill (OBBB), but the Notice focuses on how employers may apply that method in practice.
Under the premium method, an employer may calculate its credit based on premiums paid or incurred for an insurance policy that provides qualifying paid family and medical leave coverage. The Notice explains that a premium is eligible only to the extent it funds benefits that would qualify for the credit under the existing wage-based method. For example, premiums do not qualify to the extent they cover leave that is not qualifying family or medical leave, benefits for employees who are not qualifying employees, leave required by state or local law, or benefits that would not constitute qualifying wages.
Many insurance policies may cover both qualifying and non-qualifying benefits or individuals. In that situation, the employer must allocate the premium between creditable and non-creditable coverage. Notice 2026-28 permits employers to use any reasonable allocation method that is consistent with the policy terms, based on objective criteria, supported by contemporaneous records, and applied consistently throughout the tax year and across related employers treated as a single employer.
The Notice also addresses how the premium-based method interacts with the wage-based method. An employer may use the premium method for some leave and the wage method for other leave. However, an employer cannot claim both credits for the same instance of leave. In other words, if an employer claims a credit for insurance premiums that fund paid leave benefits, it cannot also claim a wage-based credit for benefits funded by those same premiums.
The Treasury Department and IRS intend to incorporate this guidance into future proposed regulations and address additional issues. Until then, employers may rely on the Notice for tax years beginning after December 31, 2025. The IRS is accepting comments on the guidance through October 16, 2026.
Action Items
- Consult with a tax advisor to determine whether PFML insurance premiums support a Section 45A credit.
OFCCP Makes Significant Changes to Federal Contractor Affirmative Action Requirements
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APPLIES TO Federal Contractors and Subcontractors Subject to OFCCP Requirements |
EFFECTIVE As Indicated |
QUESTIONS? Contact HR On-Call |
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Discussion
On August 21, 2026, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) published three rules changing affirmative action requirements for federal contractors and subcontractors. The rules follow President Trump’s Executive Order (EO) 14173, which was issued in January of 2025.
The first rule, Rescission of Executive Order 11246 Implementing Regulations, rescinds OFCCP regulations that had implemented EO 11246’s race and sex-based affirmative action requirements, effective October 26, 2026. EO 11246 had long provided the basis for federal contractor obligations to maintain affirmative action programs addressing race and sex, as well as OFCCP’s related enforcement authority. The final rule rescinds several regulations in Title 41 of the Code of Federal Regulations, including those governing contractors’ prior race and sex-based affirmative action program obligations.
The second rule, Modifications to the Regulations Implementing Section 503 of the Rehabilitation Act of 1973, as Amended, makes significant changes to the regulations implementing Section 503 of the Rehabilitation Act. Effective September 21, 2026, with some provisions effective December 21, 2026, the rule rescinds the requirement for covered contractors to invite applicants and employees to voluntarily self-identify as individuals with disabilities, including through use of Form CC-305. The rule also eliminates the 7% utilization goal for individuals with disabilities and removes related data collection and utilization-analysis requirements.
Despite these changes, Section 503’s core protections remain in place, meaning covered contractors must continue to comply with disability nondiscrimination and reasonable accommodation requirements. The final rule also retains outreach-assessment and affirmative action program requirements. In addition, the rule increases the Section 503 coverage threshold from $15,000 to $20,000.
The third rule, Modifications to the Regulations Implementing the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as Amended, makes technical revisions to the regulations implementing the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA). Effective September 21, 2026, the rule removes references to EO 11246, relocates administrative enforcement procedures into the VEVRAA regulations, and increases the VEVRAA jurisdictional coverage threshold from $150,000 to $200,000.
Importantly, these rules primarily affect covered federal contractors and subcontractors and generally do not apply to private employers without covered federal contract work. Notwithstanding, these new rules do not eliminate federal contractors’ broader obligations to avoid unlawful employment discrimination. Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Rehabilitation Act, VEVRAA, and applicable state and local laws continue to impose nondiscrimination, accommodation, recordkeeping, and other employment-related obligations.
Action Items
- Review affirmative action program obligations and planned compliance changes with legal counsel.
- Update applicable policies and procedures to reflect any eliminated, revised, or continuing obligations.
DOJ Issues Religious Freedom Guidance for Federal Agencies
On July 23, 2026, the U.S. Department of Justice (DOJ) issued guidance outlining federal agencies’ obligations to protect religious belief, expression, and accommodation in the federal workplace. The guidance broadly defines protected religious exercise to include not only belief and worship, but also religiously motivated conduct and decisions to refrain from conduct that conflicts with an individual’s beliefs. Additionally, the guidance addresses religious speech and expression at work, stating that religious materials, attire, conversations, and invitations to religious services may be protected, subject to the same limits that apply to other workplace expression and to conduct that becomes excessive or harassing. It also emphasizes that employers must consider accommodations that effectively resolve a conflict between an employee’s religious practice and a work requirement, and that an undue hardship must be evaluated based on a substantial burden in the overall context of the employer’s business. Although the guidance applies directly to federal agencies, it may offer insight into federal enforcement priorities under Title VII of the Civil Rights Act of 1964, particularly regarding religious accommodation, expression, and disparate-treatment issues. All employers should continue to evaluate religious accommodation and expression issues individually, ensuring that workplace conduct and anti-harassment policies are applied consistently while recognizing that religious expression may require accommodation depending on the circumstances.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2026 ManagEase