Payroll: Group Insurance

Generally, payments by an employer to group insurance or pension plans are excluded.;

Rule 2.B.2.b. of Basic Manual

"Payments by employer"



"Payments by employee"

Once the employee has control of the funds, has them in hand so to speak, the funds are remuneration for WC purposes. If an employer sets aside funds which the employee cannot put in his/her pocket, these funds are not remuneration for WC purposes. If an employee has control of funds to the extent that the employee can decide what percentage shall go into his pocket and what percent shall be contributed to a plan, the entire amount (pocket + contribution) is remuneration for WC purposes.

As an example, if an employee's hourly salary of $12.00 includes an amount of $2.00 identified as a "fringe benefits equivalency payment," it must be considered remuneration for WC premium purposes. The $2.00 is being paid directly to the employee for services performed. While it may be referred to as a "health benefit," it is in reality a component of the employee's hourly wages. The employer is not making the payment to a group insurance plan as required for exclusion from remuneration under the Basic Manual rules.

An insured contests an auditors decision that the inclusion of $10,00 in payroll which represents an amount paid to a group health insurance plan for two owner/employees. The insured was advised by its CPA that the IRS deems the payment of group health insurance to be a taxable event for any person owning 2% or more of an Indiana "S" Corporation. The auditor tells the insured, "Any excludable payments would not show up on a quarterly 941 form on line 2 (Total wages and tips, plus other compensation.)"

The dollars in question represent amounts paid directly to the health care provider. Therefore, the $10,000 is not considered remuneration for workers compensation premium purposes.

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