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Third party disability insurance annual reporting requirements

Third party disability insurance is a type of policy that covers employees who take qualified, extended time out of the office. Examples of qualified time off include maternity leave or illness. It can either be short term (less than 6 months) or long term (more than 6 months) in nature.

Short Term Disability insurance is complex from a tax perspective. Employee taxes are often managed by the insurer, while company taxes like Social Security and Medicare need to be paid by the employer. The specifics of the taxation will vary based on your plan document and the requirements specified by the insurer.

Please be aware that you may be required to file additional forms depending on your plan. If the sick pay will be reported on Forms W-2 under the name and Federal EIN of the insurer or agent, then the employer must file Form 8922. Here is a link to the form instructions. This form is not currently supported by Gusto. 

If the sick pay will be reported on Forms W-2 under the name and Federal EIN of the employer, then only the insurer/agent will need to file Form 8922, and the employer does not need to file this form.

Note: If you have a third party disability policy, please follow these instructions to set it up in your Gusto account. In the meantime, please let us know if you have one of these plans contacting our Care team.