TN 29 (12-12)
RS 01402.090 Sick and Disability Payments
Social Security Act, Sections 209(a)(2)(A) and (B) , 209(a)(3) ;
20 CFR 404.1049 , 20 CFR 404.1051
A. Policy for sick and disability payments
Sick and disability payments generally mean money paid to an employee under a plan or system because of the employee's temporary absence from work due to injury, sickness, or disability. We may consider sick and disability payments wages for Social Security purposes.
1. Payments made before January 1, 1982
Payments made under a plan or a system are not wages. Payments not made under a plan or system are wages for only the first six months following the month the employee last worked for that employer.
2. Payments made beginning January 1, 1982
Payments are wages for the first six calendar months after the calendar month in which the employee last worked for the employer, regardless of whether under a plan or system. Payments are not wages after the six months.
B. Workers’ compensation payments
Workers’ compensation payments are not wages and are not subject to these provisions. See Workers’ Compensation (WC) Payments in RS 01402.295.
C. Payments attributable to employee contributions
Payments attributable to the employee’s own contributions to the plan are not wages from any payments or portion of payments received by an employee during the first six-month period. Such payments are a return on the employee's premium rather than pay for service.
D. Third-party payments and Internal Revenue Service (IRS) reporting requirements
A third party, who pays sick payments to an employee, such as an insurance company, or a state agency that administers a state program, is responsible for:
withholding the employee's share of Federal Insurance Contributions Act (FICA) taxes; and
depositing the amounts with the IRS; and
notifying the actual employer (the last employer of record) of the amount of sick pay made to the employee.
Third-party payers and employers should consult IRS regulations for the rules on reporting sick pay (based on sections 5 USC § 6302 and 26 USC § 6051 of the Internal Revenue Code).
E. Payments under a state temporary disability insurance program
1. State plans
Some states have temporary disability insurance laws to compensate employees who are disabled, unable to pursue gainful employment, and who suffer loss of income by reason of short-term non-occupational sickness or accident.
2. Wage exclusion status
We determine the wage exclusion status of these payments under the rules in RS 01402.090A.1. or RS 01402.090A.2., in this section.
F. Supplemental medical insurance premiums
1. Payments under a plan
Premium payments by or on behalf of an employer (e.g., a union) are not wages if they are made under a plan and under the conditions discussed in Rules Governing Group Billing Arrangement in HI 01001.240.
2. Payments not under a plan
For premium payments not made under a plan, the rules in RS 01402.090A.2., in this section; that is, the payments made after the first six months are not wages.