DeRosa Mangold Blog

The Affordable Care Act requires employers to report the cost of employer provided group health insurance provided to an employee on Form W-2. The IRS has an easy to read document on their website which we have reproduced for you here. As always, we recommend you stay abreast of this ever changing environment and consult your tax advisor if you have any questions regarding IRS regulations. However, you may have some questions for us with regard to your Sage software. Below are a few questions you may have.

1. Does this apply to my company?

As we read current guidance, there is a reporting exemption for employers who report less than 250 employees in a year for 2012. Last year, popular guidance was that ALL employers would have to report the cost of Employer Provided Group Health Insurance in 2014 on Form W-2 for 2013. However, as we read current guidance, this exemption for 2012 extends to future years until IRS issues additional guidance and reporting would not be required until the next tax year beginning at least 6 months after the issuance of such guidance.

2. How is this tracked in Sage MAS 90, Sage MAS 200, Sage 100 ERP Payroll?

You would track this by setting up an Employer Deduction and assigning that deduction to an employee receiving the benefit.

If you have never used an employer deduction before, it’s not really a deduction. It’s an accrual of an employer provided benefit on an employee by employee basis. In MAS 90/200/100 ERP, the set up occurs in Deduction Maintenance and the "Type" is Employer Deduction. An Employer Deduction DOES NOT reduce the employee’s pay. It simply makes an accrual entry on the General Ledger (Debit Expense and Credit Liability) and tracks an amount in the Employee Masterfile each time an employee is paid with this deduction included in the payroll.

For Example, we provide our employee’s health insurance for themselves but they have to pay for their dependents. The monthly cost of their insurance is $480.00 and they are paid twice a month. We would want the Employer Contribution Deduction for the employee set to $240.00 per paycheck and it would result in the following entry:

Employer Provided Health Insurance Expense $240.00

Accrued Health Insurance Payable $240.00

Of course you can set up the entry as you wish or if you don’t want an entry made, you can set up the deduction to debit and credit the same account.

3. How is it put on Form W2?

In the deduction setup we would flag to put in Box 12 and give it a code of DD.

4. What if I don’t set up the deduction at the beginning of the year?

The deduction can be added to the employee at the end of the year and force the annual amount to put on your W2.

5. What coverages should be reported?

Visit http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage#.UMpcyeSa86c.gmail to view a table explaining the coverages that are required, optional or not to be reported, as well as how they apply to entities. As always we encourage you to contact your tax advisor if you are unsure.

If you have any questions, please do not hesitate to call.

We are here to help you!

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*Sage 100 ERP is formerly known as Sage MAS90 ERP and Sage MAS200 ERP
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