Employer Paid Health Care Value

Today’s post comes to us via the Alfred Johnson blog. Please visit alfredjohnson.net for more helpful information.

Employers, including nonprofit organizations, are required, beginning in the calendar year 2017, to report the fair market value of provided health care benefits. This information is to be included on IRS Form W-2 in Box 12, using code DD, for every employee receiving health care benefits as part of his or her compensation. ShelbyNext | Financials nonprofit accounting software is prepared for this new requirement. Use the steps below to setup up a non-cash compensation distribution and add to an employee’s record.

Use the following steps to add the Health Care Value code on employees’ FORM W-2 within the software

First, set up a Compensation template:

  1. Navigate to the Payroll application
  2. Hover over Modify and choose Employer Information
  3. Click the General Ledger Interface button
  4. Make a note of the account code you have set up for Non-Cash Clearing Account
    (NOTE: If this field is blank, then go to General Ledger, Modify Chart of Accounts, and
    add an account – usually a liability account type – then return to Payroll)
  5. Hover over Modify and choose Compensation Information
  6. On the filter, screen choose View All Compensation Types
  7. Click Search
  8. Locate and click the edit icon on Employer-Paid Health Care Value
  9. Click the Add New Distribution link
  10. Enter the account code for Non-Cash Clearing Account in the Regular Pay field
  11. Click Update
    1. Notice that Social Security & Medicare automatically inherit the value set in Regular Pay
    2. Edit Social Security, change or keep same values
    3. Click Update
    4. Edit Medicare, change or keep same values and
    5. Click Update
    6. Click OK to save your work.
  12. IMPORTANT: Click Update to save the distribution

Finally, create a manual check for each employee using the Employer Paid Health Care Value settings:

  1. In the Payroll application, hover over Enter and choose Manual Check
  2. Search for and select an employee who will get a FORM W-2 this year
  3. Click Add New Compensation link
  4. Choose Employer-Paid Health Care Value
  5. Enter the total amount for the reporting year into the Amount field
  6. Click OK
  7. Click Apply and enter the next employee, or click Update to save and exit Manual Check entry

Source: alfredjohnson.net