Third-Party Sick Pay Solution

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Requirements

The section ‘Background’ and possibly ‘Process Details’ should be documented in the Wikinewforum.com US blueprint

Background

Sick-pay benefit payments are paid to employees by a third-party vendor such as an insurance company. The third-party vendor deducts FICA taxes on employee’s behalf and optionally Federal withholding tax if requested by the employee. In Wikinewforum.com it is required to:

• Adjust employee’s payroll results to reflect taxes withheld by the third-party vendor and increase taxable wages for reporting purpose
• Calculate employer FICA taxes considering employee’s YTD FICA salary limit
• Calculate unemployment taxes considering company specific unemployment rate and unemployment salary limit
• Ensure employee FICA wages paid by the third-party vendor are stored in Wikinewforum.com, but not remitted. FACS does not need to remit EE FICA taxes on third-party sick pay, as they are already remitted by the third-party vendor
• Report third-party sick-pay payments, employer FICA taxes, and unemployment taxes on W2, 941 and SUI

This solution is implemented in Wikinewforum.com in the Third-Party Sick Pay Process.

• The section ‘Configuration Details’ and possibly ‘Process Details’ should be documented in the Configuration Handbook.

Similar Threads:

• Sick leave
• sick leave
• PCR for Sick leave
• covered under ESI will not be eligible for SL(Sick Leave)
• 10 things we are sick of in B'wood

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Configuration Details

Wage Type 9911 (3PSP - Taxable Ben)This wage type is configured to record the taxable portion of the sick-pay payment made to the employee by a third-party vendor. It is configured the same as any other wage type (regular taxability with processing class 71, value 1). The wage type is:

• Available only on IT0221
• Not printed on the remuneration statement
• Added to technical taxable amount wage types (i.e., /3XX, /6XX and /7XX, and reported on W2)

Wage Type 9912 (3PSP – Non-Tax Ben)

This wage type is configured to record the non-taxable portion of the sick-pay payment made to the employee by a third-party vendor. As the name indicates, the wage type is configured as a tax-free payment. The wage type is:

• Available only on IT0221
• Not printed on the remuneration statement
• Printed on W2 Box 12 with code ‘J’ by FACS.

Wage Types 9901 (3PSP /401 Offset), 9903 (3PSP /403 Offset), and 9905 (3PSP /405 Offset)

• These wage types are copied from wage types /401, /403, and /405, and are available only on IT0221. The amounts recorded for 9901, 9903, and 9905 must equal the amounts recorded for /401, /403, and /405 respectively. These wage types are used to ensure that taxes are not remitted twice and that the amounts are reported correctly on IRS Form 941, line 7b.

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Wage Type Mapping for FACS

Wage Type 9911: No special mapping is required for FACS. Taxable wages (/7XX) are increased in SAP and will be reported on W2.

Wage Type 9901: As of now, there have been no requests to send this information to FACS. It is not very likely that employees will request a third-party vendor to withhold federal income tax. If this condition arises in the future, FACS will have to create a new VAR to handle this wage type.

Wage type 9912: FACS will report this wage type on Box 12 with code J. It will be mapped in the table as below:

MANDT	LGART	TYP	VAR	DESC0	BOXNBR0	BOXCODE0	SIGNIND
XXX	9912	O	BOX12J	Box 12 J Non Taxable Sick Pay	12	J	+

Wage Types 9903 and 9905: FACS will reduce the amount of Social Security and Medicare tax to be remitted. It will also ensure that the amounts are printed correctly on form 941.

MANDT	LGART	TYP	VAR	DESC0	BOXNBR0	BOXCODE0	SIGNIND
XXX	9903	O	BOX3PSST	3PSP Social Security Tax	97		+
XXX	9905	O	BOX3PMDT	3PSP Medicare Tax	96		+

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Process Details

Example of Business Process Steps:

STEP 1: Receive tax and taxable amounts from third party.
STEP 2: Record amounts in SAP.
STEP 3: Run payroll.
STEP 4: Map wage type to legal forms.

STEP 1: Receive tax and taxable amounts from third party. Usually this information is sent as a printed document by the third-party vendor.
In this example:

• Employee is authorized for $5840.00.
• Taxable portion of the benefit is $3058.99.
• Non-taxable portion of the benefit is $5840.00 – $3058.00 = $2781.01.
• FICA (/403) tax withheld by the vendor = $189.67.
• Medicare (/405) tax withheld by the vendor = $44.34.
• Federal income tax withheld by the vendor = $0.

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STEP 2: Record amounts in SAP.

• Record amounts in SAP on IT0221 subtype blank or ‘YAWA’ based on the information available on the form.
• In the example below, subtype blank is used. For the state of New Jersey, unemployment tax calculation is disabled via IT0235, but other ER taxes are not disabled.

• Depending on state-specific requirements, if it is required to override taxes, IT0235 can be created with BEGDA = ENDDA = check date on IT0221. For example, make EE exempt for state unemployment for the state of New Jersey.
• If IT0221 is created with subtype YAWA, IT0235 will have to be created to stop the system from calculating FED withholding and/or any state taxes.