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Starting January 1, 2017 employers with less than 50 employees can offer employees a reimbursement for medical insurance that provides minimum essential coverage (MEC).  There are a number of requirements and regulations that should be considered before deciding to provide this non-taxable benefit.

If you did comply with the required notices on or before March 12, 2017 then you can use Shelby Next Financials to add the required FF code in box 12 of the FORM – W2.  For 2018 tax year, notices have to be provided at least 90 days before the start of the new year.  Instructions for adding required information on employees’ FORM – W2 follows.


First, setup 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 setup 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. Click Add New Compensation link
  9. Click the Add New Distribution link
  10. Enter a name for the new distribution (We will use “Qualified Health Reimbursement Arrangements”
  11. Click the Edit icon for Regular Pay
  12. Enter the account number information into the displayed boxes
    1. NOTE:  To follow best practices use the liability account for Non-cash Clearing Account that you should have set up under Modify > Employer Information > General Ledger Interface.
  13. Click the Update button, which will bring you to a new screen
    1. There should only be 2 check marks on this screen:  Non-Cash Compensation, and Subject to Regular Pay Only.
    2. Select Box 12 for Box #
    3. Select code FF for Box 12 Code
  14. Click the Update button

Finally, create and post 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 Qualified Health Reimbursement Arrangements
  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
  8. When finished with the batch
  9. Hover over Manage and choose Manage Manual Checks
  10. Select the batch and post.  This will update the FORM W-2, but will not create a journal entry.