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Focus on New Laws: PERA Supplemental Pay Rules Simplified for MNPL
Starting July 1, employers that allow employees to supplement Minnesota Paid Leave benefits with paid time off will have a much simpler reporting process.
A new law passed during the 2026 legislative session, included in Chapter 106, simplifies how employers determine eligible salary for Public Employees Retirement Association (PERA) pension benefits when an employee takes an authorized leave under Minnesota Paid Leave (MNPL) and supplements their MNPL benefit with employer-provided paid time off. The change applies to authorized leaves taken on or after July 1, 2026.
MNPL provides partial wage replacement to employees taking an authorized leave, meaning employees do not receive their full salary while on leave.
However, employers may allow employees to supplement their MNPL benefit with accrued paid time off, such as vacation or sick leave, so employees can receive up to their full salary during the leave. Under current law, that supplemental pay is considered PERA-eligible salary only in certain circumstances.
Current eligibility rules
From Jan. 1 through June 30, 2026, supplemental pay is PERA-eligible salary only if:
- The supplemental pay is used during a medical leave of absence and provides 50% of an employee’s regular earnings.
- The supplemental pay is used during a nonmedical leave and equals 100% of an employee’s regular earnings.
What changes July 1?
Effective for all pay issued on or after July 1, 2026, all supplemental pay provided during an authorized leave will be treated as PERA-eligible salary, regardless of the type of leave.
The change is particularly relevant for employers that allow employees to supplement MNPL benefits with accrued paid time off. Beginning July 1, employees who receive supplemental pay during an authorized leave will be able to receive PERA service credit and salary credit without employers having to determine PERA eligibility based on the type of leave. The change significantly simplifies the process for both employers and employees.
Contact the League of Minnesota Cities Human Resources Department with any questions at [email protected].