Qualified Sick Pay Plan (QSPP) is an agreement for employers to continue to pay an employee’s salary during a period of disability resulting in an absence from work. The employer is responsible for determining what employees qualify for QSPP and how long they will qualify for QSPP. These factors may change depending on the employee and the employee’s rank within the company.
Administration and Design
When creating a QSPP, you should consider the following:
- - Which employees are covered
- - How long these employees will be paid
- - When the benefits will begin
- - How the benefits will be determined, if a covered employee becomes disabled
- - Which company representative will approve claims and administer benefits on behalf of the plan
- - How the benefits will be funded under the plan
By purchasing insurance on a QSPP, the insurance company determines the validity of a disability claim as well as when the employee has recovered. The insurance company also holds financial liability for benefit payments and takes care of tax reporting and claims service.
If you choose to self-fund the plan, you either pay the employee directly with current profits or set up a trust for payments. Under this option, your company determines the validity of claims and proper Federal Insurance and Compensation Act (FICA) and Federal Unemployment Tax Act (FUTA) tax withholdings and reporting requirements. Your company must also shoulder the benefit liability on financial statements under the Financial Accounting Standard (FAS) 112.
Communication to Employees
Once the plan is in place, covered employees will be notified of this option in the event that they become disabled and cannot work.
The ultimate benefit of QSPPs is that they eliminate the risk of unnecessary tax consequences for the company and covered employees when the company chooses to financially support employees while they are disabled.
To learn more about these plans, contact Barrow Group today.