Recently, this question from a concerned employer came to me:
“Do I have to report the money I contribute to an employee’s retirement plan to my workers’ comp carrier?”
Contributory payments made by the employer in connection with group insurance, stock purchase plans or qualified retirement plans and deferred compensation plans are not to be included in the payroll you report for workers’ comp. Plan must be qualified under Section 125.
To really answer the question, my next question is, “Is it a qualifying plan under Section 125 IRS code?”
If its not, then its considered money they earned but THEY chose to defer and therefore it IS reportable as payroll for workers’ comp …
Example 1 –
Joe earns $2,000 and his employer elects to put another $200 into his retirement account. If it qualifies under Section 125, the employer only reports payroll of $2,000 for both payroll and comp purposes and Joe does too. If not, the employer must report payroll of $2,200 because Joe is deemed to have earned $2,200, irregardless of how much Joe takes home right now. Make sure it qualifies as a Section 125 plan!
Example 2 –
Joe earns $2,200 and JOE elects to put $200 into his retirement account. Even if it qualfies under a Section 125, you still have to report wages of $2,200 for workers comp because that’s what he earned.
Example 3 –
Joe earns $2,200 and he elects to have $200 taken out as part of his contribution for his own health insurance costs through a Section 125 plan. He only reports income of $2,000 and you only report payroll of $2,000.
Example 4 –
Joe earns $2,200 and he elects to have $200 deposited into his Health Savings Account. He only reports income of $2,000 and you only report payroll of $2,000, PLUS any contributions you make as the employer on top of the $2,200 are not reportable to workers’ comp.
So if the employer contributes $200 and Joe contributes $200 , for workers’ comp purposes, only $2,000 total is reported.
Does that clarify?
Bottom line, make sure its a qualifying plan. If your employees are currently paying a portion of their own health insurance costs outside of a Section 125 plan, both you and they are wasting a lot of money.