Fringe Benefits

Massachusetts follows the federal definition of wages for withholding on fringe benefits. Therefore, fringe benefits that are excluded from withholding for federal purposes are excluded from Massachusetts withholding as well.

(a) Exclusions under Code § 3401(a) . Withholding is not required in Massachusetts to the same extent it is not required federally on the fringe benefits contained in Code § 3401(a). While 830 CMR 62B.2.1 does not reflect changes made to Code § 3401(a) after the promulgation date of 830 CMR 62B.2.1, Massachusetts automatically adopts such changes. All terms are as defined in or under Code § 3401(a). As of the promulgation date of 830 CMR 62B.2.1, excluded from Massachusetts withholding are federally excludable: 1. group-term life insurance on the life of an employee; 2. remuneration for moving expenses; 3. educational assistance programs; 4. dependent care assistance programs, including dependent care assistance programs as a qualified military benefit; 5. employee achievement awards; 6. qualified scholarships; 7. Code § 132 fringe benefits: a. no additional-cost service; b. qualified employee discount; c. working condition fringe; d. de minimis fringe; e. qualified transportation fringe; f. qualified moving expense reimbursement; 8. medical care reimbursement paid under a self-insured medical reimbursement plan; 9. contributions to or for the benefit of an employee under a medical savings account; and 10.payment to or for the benefit of an employee if the employee could exclude the payment from income under Code § 106(d) (contributions to health savings accounts). (b) Sick Pay. Sick pay that is either : 1. attributable to contributions by the employer that were not includible in the gross income of the employee, or 2. paid by the employer, is included in the federal definition of wages and is therefore subject to withholding in Massachusetts. Employers shall also withhold Massachusetts income tax if an employee has requested that an employer withhold on sick pay that is not included in wages for federal income tax purposes under Code § 3402(o). (c) Cafeteria Plans . Employer contributions to, and employee benefits provided under, a Code § 125 cafeteria plan are subject to Massachusetts withholding to the same extent they are subject to federal withholding.