Section 2730.130  Exceptions to Liability of Certain Third Party Payors for Contributions and Reporting of Certain Payments on Account of Sickness and Accident Disability

a)         Section 235 of the Act [820 ILCS 405/235] provides, in pertinent part, that the term "wages" does not include:

            The amount of any payment (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment), made to, or on behalf of, an individual or any of his dependents under a plan or system established by an employer which makes provision generally for individuals performing services for him (or for such individuals generally and their dependents) or for a class or classes of such individuals (or for a class or classes of individuals and their dependents), on account of sickness or accidental disability, or medical or hospitalization expenses in connection with sickness or accident disability.

b)         For purposes of this exclusion:

1)         The plan or system must provide generally for individuals performing services for the employer, or for such individuals and their dependents, or for a class or classes of such individuals and their dependents (plan has a definite basis for determining who is eligible, such as length of service, occupation or salary classification);

2)         A payment is made on account of sickness or accident disability if it constitutes remuneration or a payment in lieu of remuneration for any period during which the individual is absent from work (unable to perform services) on account of sickness or personal injuries;

3)         A dependent of an individual is the individual's husband or wife, children and any other member of the individual's immediate family as defined in 18 USC 115(c)(2);

4)         Payments made under a workers' compensation law are excluded from the term "wages";

5)         If an individual receives a payment on account of sickness or accident disability which is not initially made under a workers' compensation law but that must later be repaid to the employer because the individual receives a workers' compensation award with respect to the same period of absence from work, the payment shall be considered "wages".

c)         Payments made by third parties not excluded by this Part or the Act are to be included as "wages" and the third party is to be considered the employer, unless the requirements in this subsection (c) are met.

1)         The last employer for whom the individual worked prior to becoming sick or disabled or for whom the individual was working at the time the individual became sick or disabled shall be deemed to be the employer for whom the personal services are performed, provided that the employer made contributions on behalf of the individual to the plan or system under which the individual is paid.

2)         The absence of an agreement between the third party payor and the employer that the employer will be required to report the wages and pay the contributions will render the third party as the employer, and, as such, the third party will be required to report the wages and pay the contributions as applicable.

3)         The Agency will consider the employer for whom the personal services are performed to be the employer for the purposes of reporting wages paid to workers, pursuant to 56 Ill. Adm. Code 2760.125, and the payment of contributions if all of the following requirements are met:

A)        The third party and the employer for whom the personal services are performed agree that the employer (not the third party) will be treated as the employer with respect to the wages; and

B)        The third party notifies the employer at least six working days prior to the end of the month following the preceding calendar quarter (or the preceding month in the case of an employer subject to 56 Ill. Adm. Code 2760.125(a)(1)) of the Social Security account numbers, employee names, and the amount of sickness or accident disability payments made during the month or calendar quarter, as the case may be.

i)          For the purposes of determining timeliness of the notice, the provisions of 56 Ill. Adm. Code 2765.60 shall apply;

ii)         A notification that contains the required information and that has been made by a third party to an employer, as required by the Federal Insurance Contributions Act (26 USC 1501 et seq.) will be sufficient notification under this Part.

4)         The employer reports the wages pursuant to Section 2760.125, and includes the wages in the calculation and payment of contributions.

d)         A third party making a payment on account of sickness or accident disability to an individual as agent for the employer or making such a payment directly to the employer shall not be treated as the employer with respect to the payments unless the agency agreement so provides.  The determining factor as to whether a third party is an agent of the employer is whether the third party bears any insurance risk.

1)         If the third party bears no insurance risk and is reimbursed on a cost plus fee basis, the third party is an agent of the employer even if the third party is responsible for making determinations of eligibility of the individual employees of the employer for payments on account of sickness and accident disability.

2)         If the third party is paid an insurance premium and not reimbursed on a cost plus fee basis, the third party is not an agent of the employer, but the third party is treated as the employer, as provided in subsection (c).

(Source:  Amended at 37 Ill. Reg. 7432, effective May 14, 2013)