Paul Sanchez
Setting up employee medical insurance deductions in Sage 50 involves a series of steps. Firstly, you need to create a new benefit record by clicking New and specifying the type of insurance plan (e.g., employee, company, or both). You should also give the plan a name, which Sage 50 will use internally on employee screens and reports. This name must follow specific character and length rules. Next, you can choose to set aside money for each paycheck to cover the insurance expenses, and you must enter the standard amount employees pay per check. This amount can be adjusted for individual employees. You can also indicate whether the employee contribution should appear on the W-2 form. To finalise the setup, ensure that the new payroll field is mapped correctly to the W-2 form, and assign fields for company and employee-paid taxes as needed. Once complete, the employee's contribution will be automatically calculated and deducted from their gross pay.
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What You'll Learn
Setting up payroll deductions
Step 1: Accessing the Payroll Settings
To begin setting up payroll deductions, go to the Home window on the Setup menu and choose Settings. From there, click on Payroll, and then Deductions. This will allow you to modify the default payroll deductions to suit your company's needs.
Step 2: Modifying Deductions
In the Deduct By column, double-click next to the deduction you want to change. Select your preferred deduction method and click Select. You can also modify the deduction name by clicking on Payroll, then Names, followed by Income and Deductions. In the Name column, click on the deduction and type in the new name.
Step 3: Selecting the Deduction Timing
If you want to deduct the employee's income after specific items, such as tax, benefits, contributions, or vacation pay, go back to the Setup menu and click on Payroll, and then Deductions. In the Deduct After columns, place a checkmark next to the items you want to prioritize before deducting the employee's income.
Step 4: Applying Deductions to Employee Records
After setting up the payroll deductions, remember to modify each employee's record to ensure that these deductions are applied accurately in the payroll calculations.
Step 5: Handling Medical Insurance Deductions
When dealing with medical insurance, set up a liability account for the Benefit Payable. Link this account number in the payroll to the deduction tab, also labelled as Benefit Payable. When an invoice is received, enter the expense as a debit to Insurance Expense and credit the Bank Account. Ensure that the employee contribution is reflected accurately, whether paid by cheque or otherwise.
Step 6: Adding Benefits or Deductions
If you need to add benefits or deductions, go to the File menu and select Payroll Formulas, then choose User-Maintained. Enter the formula ID and a formula name following the naming convention (e.g., NAME YEAR). Typically, the effect on gross pay is "Subtracts from Gross."
By following these steps, you can effectively set up payroll deductions in Sage 50, including those for employee medical insurance.
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Creating a new benefit record
To create a new benefit record, click on 'New'. This is applicable if the employee does not already have a benefit of this type. If they do, the existing benefit record will appear. Once you have clicked 'New', you will be able to enter the details of the benefit.
Firstly, you need to set up a liability account for the Benefit Payable. This account should be linked to the payroll deduction tab, also called Benefit Payable. The invoice should be split into DR Benefit Expense and DR Benefit Payable and CR bank.
Next, you need to select the type of insurance plan. Choose between Employee, Company, or Both. Give the plan a name, which Sage 50 will use on employee screens and reports. This name must start with a letter, be at least two characters long, and cannot contain spaces or special characters. You must also decide whether the company expenses for this plan will be tracked per paycheck. If you choose to put aside money for each paycheck, you can then enter the standard amount that employees will pay per check. This can be adjusted for individual employees.
Finally, you can indicate whether the employee contribution should appear on the W-2. Click 'OK' to save the benefit, and the chargeable cost and P11D cost for the benefit will appear in the Medical Insurance window status bar.
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Selecting the type of insurance plan
Factors to Consider
- Cost: Evaluate the total plan cost, including monthly premiums, copays, and related service costs for employees. It is important to find a balance between keeping costs affordable for employees and staying within your organization's budget.
- Employee Needs: Consider the demographics and specific health needs of your employees. Factors such as age, physical ability, and known health conditions can help predict the type of coverage they may require.
- Convenience: Easy access to services and providers is essential for many employees. This includes the convenience of scheduling appointments, selecting providers, filing claims, and seeking reimbursement.
- Complementary Benefits: Consider the other benefits you offer, such as vision, dental, or life insurance coverage. If you do not provide these as separate benefits, you may want to opt for a more comprehensive health insurance plan to maintain employee satisfaction.
Common Types of Insurance Plans
- Health Maintenance Organizations (HMOs): HMOs are one of the most prevalent types of health care plans offered by employers. They establish a network of providers that employees can access with a low-cost copay. HMOs require employees to select a primary care physician (PCP) who can refer them to specialists within the network.
- Preferred Provider Organizations (PPOs): PPOs are flexible plans that allow employees to choose their physicians, including those outside the preferred provider network. Employees must meet an annual deductible before their health insurer covers their medical bills. PPOs are a good fit for those who have already established relationships with specific physicians.
- Catastrophic Plans: These plans offer lower monthly premium payments and are suitable for those who meet certain age, income, or hardship eligibility requirements. They are designed for individuals who do not frequently use healthcare services but want coverage for emergency or preventive care.
- Health Reimbursement Arrangements (HRAs): HRAs offer flexibility, allowing employees to buy the medical services and individual plans that best suit their needs. Employers can then reimburse employees tax-free up to their allowance amount. A specific type of HRA is the Qualified Small Employer HRA (QSEHRA), designed for organizations with fewer than 50 full-time equivalent employees.
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Adjusting employee defaults
In the Employee Fields tab, you can set up payroll defaults for each employee. The G/L Account field is the account number in the general ledger where information for this employee is posted. Selecting the Calculate check box allows you to choose a formula name to calculate tax amounts. If you subscribe to a Sage Business Care plan, you will have access to formula names and their formulas to calculate taxes and other deductions in Sage 50.
Additionally, selecting the Run check box indicates that you don't want the balance to be reset to zero when you close the year. The Adjust button, when selected, displays the Calculate Adjusted Gross window, where you can choose which payroll fields are used to determine the adjusted gross for this calculation. Please note that payroll fields cannot be calculated without a Sage Business Care plan subscription.
In the Employer tab, you can view the deductions and amounts that the employer is required to pay for each employee, including the employer's portion of Social Security, Federal Unemployment Tax, and any 401K contributions. To set up a standard health insurance benefit, go to the Insurance Plans window and select the type of plan. You can choose whether the employee, company, or both pay for the plan. Most plan types require you to give the plan a name, which Sage 50 will use internally on employee screens and reports. You can also choose to put aside money for each paycheck to track the amount you will have to pay.
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Viewing payroll calculations
To view payroll calculations in Sage 50, you can refer to the payroll reports. These reports are essential documents that provide detailed insights into various aspects of your payroll process, including employee earnings, deductions, and taxes.
To access these reports, go to the "Reports and Forms" menu and select "Payroll". From there, you can choose the specific report you want to view. You have the option to select from post-update, pre-update, and historical reports. Post-update reports show updated employee year-to-date values, while pre-update reports are printed before modification to know the values for the active processing period, such as employee payslips. Historical reports, on the other hand, allow you to view and reprint old copies of employee payslips.
When viewing the payroll reports, you can expect to see details such as taxable (adjusted) gross, employee's gross pay, and tax for specific payroll deductions. These reports are particularly useful for payroll tax calculations and preparing state payroll tax returns.
If you have just installed Sage 50, note that payroll taxes may not calculate automatically or accurately. To ensure up-to-date calculations, consider subscribing to a plan that includes payroll and installing the latest updates. This will allow Sage 50 to calculate payroll taxes based on your area, employee setup, and current tax laws.
Additionally, you can customise your payroll reports using the "Report Designer" tool. This allows you to add or remove fields, adjust the layout, and include custom calculations. Once you've made your desired changes, remember to save your customised report template for future use.
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Frequently asked questions
In the Home window on the Setup menu, choose Settings. Click on Payroll, and then Deductions. Double click in the Deduct By column next to the deduction you want to modify. Select the deduction method and click Select.
To create a new benefit record, click New. To save the benefit, click Save. The chargeable cost and P11D cost for the benefit will appear in the Medical Insurance window status bar.
On the Insurance Plans window, select the type of plan and who will pay for it (employee, company, or both). Give the plan a name that is at least 2 characters long and does not contain any special characters. Indicate if the employee contribution should appear on the W-2.
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