Important - First verify if your provider will be issuing W-2s 

Contact your third-party provider to confirm if they will be issuing Sick Pay amounts on a separate W-2 (to avoid overstating third-party payment reporting). 

If the provider will issue a W-2, Heartland will not include these amounts on the forms we are providing or pay associated employer liabilities for those payments.

If you need to include Sick Pay amounts on your employee’s Heartland issued W-2, send the statement(s) from your third-party provider to your Payroll Support Team showing the payments made to employee(s).

What is Third-Party Sick Pay (3PSP)?

Third-party Sick Pay are payments made by a third party, such as a state or private insurer, to employees due to a non-job-related illness or injury.  

Third-party Sick Pay (3PSP) includes both short-term and long-term benefits. Pay to the employee is often based on a percentage of their regular wages.  

Short-Term: Taxable for all taxes when benefits are paid to employees.

• Employee taxes are paid by the 3rd party agency issuing payment.
• Employer taxes are collected through payroll.

Long-Term: Taxable for Federal and State withholding only when benefits are paid to employees.

• The 3rd party agency is responsible for tax withholding and payment to agencies.  
• These amounts are reflected on line 2 of the employer’s Form 941. 

Non-Taxable: A portion or all may be non-taxable if the employee has paid into the policy with post-tax dollars through payroll deductions. 

• Appears in Box 12, Code J on the employee’s W-2.

How to report Third-Party Sick Pay (3PSP) 

Is the third-party provider issuing a W-2 for the payments made to the employee?  

If unsure, contact the provider to confirm. 

Yes: If the third-party provider will issue a W-2, it does not need to be reported to Heartland, to avoid overstating payments and tax liability. 

No:  If the third-party provider is not issuing a W-2, send the statements to your Payroll Support Team detailing all payments to employee(s).  

We will enter and process it in the Heartland system to include the payments on the Heartland-issued W-2s and submit the employer tax liabilities for you.

Additional information can be found on the IRS Publication 15-A, under Sick Pay Reporting.