Tax Regulations

To comply with the regulations for the equivalent plan and other payroll taxes, certain tax obligations must be fulfilled.

Income and FICA Tax

American Fidelity will withhold federal and state income taxes from PFMLI taxable benefits that are considered third-party sick pay to the extent required, including the employee’s portion of FICA tax. The employer is responsible for remitting any additional state, local or federal taxes, including W-2 reporting. Please consult an attorney or tax professional regarding your specific situation.

While the Internal Revenue Service (IRS) has not provided definitive guidance, for medical leave benefits, the employer paid portion of the taxable benefit is subject to FICA and reported on Form W-2, unless the employer paid portion of the contribution is taxed as wages (imputed to the employee’s wages).

All non-medical leave benefits are not subject to FICA, but the gross benefit must be documented on 1099-MISC.

All medical leave benefits we will withhold FICA tax and provide you with reporting information as outlined below and provide your employees with IRS Form 1099-MISC for other benefits.

You are responsible for Form W-2 reporting. All employers and employees should consult their own tax advisors regarding the tax consequences of PFMLI contributions and benefits.

The following benefits are subject to income tax:

  • Family leave benefits
  • Safe leave/personal protected leave benefits
  • Medical leave benefits are taxable based on the ratio of employer contributions to total employer and employee contributions

Third-Party Sick Pay Reporting

Certain paid leave benefits are considered third-party sick pay, which makes American Fidelity a third-party payer of sick pay. As an employer, you are responsible for reporting all sick pay benefits paid by third parties on Form W-2 and employment tax forms. To adhere to third-party sick pay reporting requirements, employers must report the entire amount of PFMLI benefits paid to an employee during their leave due to their serious health condition. This data must be reported on the employee’s Form W-2 for the year in which the benefits were paid.

View a breakdown of the information on this screen

Limitations and exclusions may apply.

Content is provided for informational purposes only and should not be considered financial, legal or tax advice.

American Fidelity and its employees cannot give tax, legal or financial advice. You must work with your own advisors to determine how these requirements apply to you.

This page, any linked websites, and any downloadable items are up to date as of February 2024 and may not reflect changes in the law, finance, administration or current events.