Terminated Employee paid premium by personal check.

[Silver70]

We received notice that a FT employee was terminating after they had terminated. This resulted us in only receiving one-half of their premiums for their health, dental and vision payments. Amazingly, they wrote us a check for the half that we paid.

 

Just trying to think this through,

1. Would i add this to their yearly totals of deductions. It would show on their w-2. (I'm thinking yes)

2. Do i deduct it from their taxable gross? (Drawing a blank on this one)

3. If it's part of their taxable gross, do i owe them some Medicare deduction amount?

4. Anything else i'm not thinking of?

 

Thank you,

[Bill Presson]

Maybe I'm missing something, but since it didn't go through payroll, why would 1-3 even be considered?

[Silver70]

So, am i overthinking it? The employee still paid their premium. Would this not be considered a tax deferred "event"?

[Bill Presson]

I don't see how it's a tax deferred event. Nothing was withheld from their pay before tax. It's no different (I don't think) from a participant writing checks to pay for COBRA coverage.

[jsb]

Perhaps you are overthinking it.

A FORMER employee paid a premium - this is not a tax deferred event.

How would you normally handle it with an identically situated departing employee when you do have adequate notice of their termination? Do you withhold balance-of-the month premiums from final pay, pre-tax? If so, I suppose you could have the employee pay back his final pay and reverse the payroll transaction, then re-run the final paycheck to withhold the premium. Puts everyone in the same position as if you had had proper notice of his termination. Seems like way too much trouble unless the former ee is putting up a big stink about the taxability issue.

We have lots of situations where employees and former employees write a check to self-pay their health benefits. It's always with their post-tax dollars and will never impact W-2 reporting.