Medical Aid for Retired Employees

Medical Aid for Retired Employees

Payroll / eTorQue, Tax

There are many companies who pay medical aid contributions for their employees who are legally retired. This does seem to cause confusion as all normal employees enjoy the benefit of the recently implemented medical tax credits only and no longer get the pre tax deduction as was the case in the past.

Employees who are disabled or over the age of 65 years and who are retired, work on a different scheme. They still enjoy medical tax credits, but in many cases this is only available on assessment. Where they still receive the pension or retirement payment from the company, they can opt to have the tax credits deducted from PAYE on a monthly basis through the payroll, as any other employee does. The major difference with these legally retired employees, is that the company paid portion of the medical aid contribution is not deemed a fringe benefit.

The reporting of this has not yet been finalised by SARS, and this will probably be clarified before March 2015. Currently the reporting is as follows:

Company contribution – 4493
Employer’s medical aid contributions in respect of an employee who qualifies for the “no value” provisions in the 7th Schedule.

Employee contribution – 4005
Medical Aid contribution.

Please note that the rules for this reporting state that if code 4493 is used, you must not use code 3810 – Medical aid contributions (subject to PAYE).