I am a fan of the new reporting requirements to include employer paid healthcare costs on W-2s. Why? Because healthcare insurance has been on the rise for years and for most employees it is an intangible cost. Even if your policy is that employees pay 20% of healthcare premiums, few of them will do the math of what this benefit costs the employer on an annual basis. Including this cost on pay stubs will help each employee see this benefit in black and white each payroll.
Note that you can click on any blue text to get more detailed information.
1. Calculate the employer cost of coverage per employee. The IRS has provided a table of what types of coverage to include in the calculation. You will need to scroll down the page to see the table.
Plan ahead, you will need to do this calculation each time your premium rates change so take time to create a spreadsheet that will be useful in the future.
2. Calculate the per payroll amount. Example:
There are 26 payrolls in the year.
The monthly cost of coverage for employee Greg is $525.
The employee pays $25.
The employer then pays $500.
$500 (monthly cost) multiplied by 12 (months in a year) divided by 26 (payrolls in a year equals $230.77.
3. Follow the directions from Intuit to create a new payroll item for employer paid healthcare cost.
4. Add the item to each employee with the amount you calculated in #2.
5. There are a few options for adding historical information. Intuit includes a couple of options in the guide. If you want the total amount to appear on pay stubs for 2012, you can add the amount to date in the first payroll. You will then need to clear out the liability since you have already paid healthcare bills up to date.
6. Ensure you have your preferences set up to include the employer portion on paystubs.
Go to “Edit”>”Preferences” then click on “Payroll and Employees” then click on the “Company Preferences” tab.
Click on the “Pay stub and Voucher printing” button.
Put a check mark in the box marked “Non taxable company items”.
Please note adding this item to pay stubs will impact expense and liability accounts. Don’t panic if you suddenly see a liability for several thousand dollars after you add historical information. The fix is easy, just email or call me.
Here are some other resources to learn more about the topic:
W-2 Health Insurance Reporting on YouTube