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Third party sick pay - this always confuses me!

Hi all. We have Shelterpoint for NY DBL insurance and we have the W-2 service so they will be preparing the third party sick W-2 forms for us. However, how does this impact our obligations to pay the FICA match or any other taxes? We receive quarterly reports from them showing who was paid what and what taxes were withheld but I don't think I need to capture that in ADP at the employee level since we are not doing the W-2s. So would I just work with ADP to tell them the total we need to pay in taxes per quarter? I can never get a good grasp on this (thank goodness I am a Benefits person, not payroll!) :)


  • There is no one-size-fits-all answer here. Someone needs to either read the contract or talk to the 3rd party. If the employee is not paying for the benefit (my choice), then SOMEONE has to handle both sides of the FICA. If your contract says that the employer handles the employer side, and I have done it that way, then they should be sending you notices of each payment they make, and you should be entering into your payroll system, probably in a field called Third Party Sick to report it. And proof what you do against the summary reports.

    This is a stupid way to do things, but I have worked with two different HR departments who never meet a stupid solution they did not love. My first choice with benefits that produce income is to ALWAYS have employee pay with post tax deductions. Benefit is no longer taxable, problem solved. My second choice is if whatever stupid reason we are going to pay for this with employee pre-tax deductions that the third party handle both sides of the transaction. Bill us for the employer FICA is they have to. My last choice is what you describe. It is massive work for no advantage. Probably why HR loves that method.

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