Third Party Sick Pay - Preparing for the End of the Year

It’s time to focus on wrapping up another year. One item on the checklist is handling third party sick pay. This task can bring about several questions such as: Who is responsible for what? How much is owed? What forms are required? Let’s go ahead and take a look at all of these questions and more to help you end this year a little more stress-free.

Here is a standard scenario: When a third party administrator, such as an insurance company, issues sick pay benefits to an employee, that company is required to withhold taxes. The tax amount varies depending on the employer’s contribution to the premium. The taxes withheld by the third party are remitted to the Internal Revenue Service (IRS) as required by law, according to that company’s remittance schedule. Employers are still responsible for handling Social Security, Medicare, and state and federal unemployment taxes.

Take a look at the following list and provide all the necessary information to your payroll provider so you can feel confident in preparing for taxes:

  • Third party administrator name
  • Type of sick pay issued to employees (E.G. short or long-term)
  • Who is responsible for issuing W-2’s to employees – Third party administrator, employer or both
  • How much the employer contributes to employee premium
  • Last work date of the employee covered under sick pay
  • How and when sick pay was entered into payroll

If your company uses a third party administrator to issue sick pay, it is very likely employers are not liable for managing sick pay taxes. However, as the list implies above, there are some necessary actions that must take place to understand exactly what is owed and which party is responsible for handling these taxes. If you use BenefitMall for your payroll service provider your Payroll Specialist will review all the disclosed information provided by an employer to help with tax payments and reports. Contact us to set up an appointment today!