3rd Party Sickpay

[austin3515]

monthly premiums paid for all employees. When ee gets sick, the insurance company pays insurance beefnits for up to 6 months. Amounts are then reported on the employees form W-2. Are these wages included for Plan purposes? Plan uses W-2 definition, but these are not wages paid by the employer. I've always been told that they should NOT be included but I've read all the guiadnace and my head is spinning. Is ther something that clearly states whether or not insruance benefits (i.e insurance premiums are paid, NOT paid on a cost + fee basis) are included in wages for plan purposes? There's a lot onw orkers comp but not this...

[K2retire]

It's been several years since I've researched this, but my recollection is that third party insurance payments should not appear on the employer's W-2 because they did not pay it. They should appear on a form issued by the insurance company. And, of course, it they appear on a document from a different payer, they are not plan compensation.

[austin3515]

My question relates to when the employer DOES report it on their own W-2. The rules on this are extensive, regarding whether or not it's reported on the insurer's W-2's / payroll tax returns and when it is reported on the employers forms.

My question is when it is reported on the employer's w-2's, etc., how is it handled for plan purposes?

[Laura Harrington]

My question relates to when the employer DOES report it on their own W-2. The rules on this are extensive, regarding whether or not it's reported on the insurer's W-2's / payroll tax returns and when it is reported on the employers forms.

My question is when it is reported on the employer's w-2's, etc., how is it handled for plan purposes?

If the definition of compensation in the document is W-2 wages, then it should be included since it is reported on the W-2.

[Belgarath]

Austin - I went through the same gyrations just last week. Ultimately, I took Laura's approach. It may well be that the employer is incorrectly reporting W-2 wages, but we don't make that determination.

Take a look at 3401(a), and more specifically 31.3401(a)-1(b)(8). Depending upon the "insurance" element, it appears that it could go either way. And while I didn't have time to do more than a cursory scan of hte W-2 instructions, it seems to me that such pay could be considered 100% W-2, 0% W-2, or anything in between. However, that was a 30 second scan so don't give it any creedence!