Disability Insurance in NJ: What Happens To Payroll When You Privatize Your Plan?
If you’re considering privatizing your disability insurance in NJ, you might
wonder how it will affect your company payroll.
First, you should know that employees won’t detect any difference in their
deductions. They will, however, notice improved service and faster, more flexible payouts if they have to make a claim.
But your HR and accounting departments should understand payroll changes that come with privatizing short-term disability insurance in NJ.
Under the state plan, the government collects employee contributions as a
levy off the employee’s paycheck. The cumulative sum is automatically
transferred to the state at the end of each quarter.
When you transition to a private TDB plan, however, you’ll be responsible
for deducting the employee portion of the premium payment from their salaries as a standard deduction. It works in much the same way you would deduct other pre-tax contributions, such as health insurance or 401K payments.
The employer and the employees’ contributions go directly into a general
account held by the employer. The employer remits the collective fund to the insurance company as a bill payment after each quarter. Unlike the state plan, where the payments are made automatically, each quarter, the insurance company requires the employer to pay the deducted funds.
EZTDB makes it easy for New Jersey business owners to remit payment and we always keep you in the loop regarding upcoming premium payments.
Who updates payroll when you privatize your disability insurance in
When you move to a private plan, the payroll provider must make the required adjustments across your entire payroll system. Your TDB insurance company should work with your payroll provider to ensure that all deductions are revised.
If your payroll vendor makes any mistakes while updating deductions or
keeping records, the funds may be sent to the state, and you’d need to reach
out to the state of New Jersey to request a refund.
Do employee contribution caps reset while switching?
No, employee contributions do not reset. Many employers assume the employee contribution caps reset when you privatize TDB. If any of the
employees in the second quarter exceeded the contribution limit and you
privatized the program in the third quarter, then they don’t have to pay for
the rest of the year.
Have additional questions about short-term disability insurance in NJ? Reach out to EZTDB today. We are your white-glove service provider for TDB and ancillary benefits.