A Qualified Sick Pay Plan (QSPP) sets company policy before an employee disability occurs. It establishes who to pay, how much to pay, when to start payments and how long to pay.
The IRS has ruled that if a Qualified Sick Pay Plan is not established prior to a disabling accident or illness, the “wages” paid to a disabled employee are not a business expense. They are not tax-deductible, and as a result, FICA taxes are not tax-deductible.
A Qualified Sick Pay Plan funded by a disability income insurance policy, transfers the risk to the insurance carrier. The insurance company determines eligibility for benefit payments, processes the claims and provides all insured benefits. A business owner enjoys a fixed premium expense that he or she can budget for and that is deductible as a business expense. The employer will need to create the actual documents specific to his or her business with the assistance of their legal counsel.
Prefer to speak to someone about a Qualified Sick Pay Plan?
*NY state residents: please call 1-800-272-2216 for referral to an agent.
Disability income insurance policies have exclusions and limitations. For costs and complete details of coverage call your agent or MassMutual at 1-800-272-2216 for a referral to an agent.
The information provided is not written or intended as specific tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
