Acute Data Systems

How to setup and Group Term Life Insurance and print on W2s in Payroll 2.x and higher in Sage 100

Summary

How to setup and Group Term Life Insurance and print on W2s in Payroll 2.x and higher (Business Framework versions)

Resolution

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Group term life insurance less than $50,000

If an employer pays for the employee’s group term life insurance premium for an amount less than $50,000, the information is not required on the W-2. It is not advisable to enter this amount as earnings with an offsetting deduction in the employee’s payroll check. Any earnings entered display as wages, and you should not report group term life insurance under $50,000 in Box 1 of the W-2.

Group term life insurance greater than $50,000

If an employer pays for the employee’s group term life insurance premium for an amount in excess of $50,000, you must report a taxable amount in boxes 1, 3, and 5 of the W-2. This amount is determined by the table IRS Pub. 15-B (link below). You must also report this information in box 12 with a code “C” (without quotes). For employees, you must withhold Social Security (up to the base amount) and Medicare excluding income tax.

Step 1: Set up a group term life insurance earning code and deduction code.

  1. Open Payroll, Setup, Earnings Code Maintenance.
  2. Create a new Earnings Code
  3. Select the Type of Earnings as Miscellaneous and the Method of Entry of Fixed Amount.
  4. Select the appropriate Tax Rule using Tax Rule Inquiry and the Tax Profile assigned to the Employee.
    • Note: There are 2 Tax Rules for Group Term Life:
    • [-800019] Group Term Life Wages Not Subject to WH
    • [-800113] Group Term Life Wages Subject to Withholding
    • ****If you are unsure which Tax Rule to use, consult your accountant or the IRS.
  5. Select all other settings as required, and click Accept
  6. Open Payroll, Setup, Deduction Code Maintenance.
  7. Create a new Deduction Code
  8. Select the Deduction Type as Standard Deduction and Calculation Method of Equal to Earnings Code(s)
  9. Under the first field in the Equal to Earnings Code area, select the earning code set up in steps 1-5.
  10. In the W2 – Box 12 Code field, type “C” (without quotes).
    • Select all other settings as required, and click Accept.

Step 2: Apply the deduction code.

  1. Open Payroll, Setup, Deduction Code Maintenance.
  2. Select the deduction code created in steps 6-11, and click Apply
  3. In the ‘Employee Number fields, select the appropriate range. Click Proceed
  4. Note: The deduction code can be applied to the employee in Deduction Code Maintenance or Employee Maintenance. If applying the code to the employee’s master file is not desired, the earnings and deduction codes may be manually selected in ‘Payroll Data Entry’. If the ‘Payroll Data Entry’ option is used instead of applying the deduction code, both the earnings code and deduction code must be manually selected.

Step 3:

  1. Open Payroll, Setup, Tax Profile Maintenance.
  2. Select the Tax Profile assigned to the Employee(s). If multiple Tax Profiles are used, the following step will need to be done to all that will have the GTL taxed.
  3. Under Tax Group Details in the Right window, under Federal, in addition to the existing selected taxes, check the following 4 tax boxes, then Accept the change.
    • FMED Excess GTL Coverage Tax Withholding
    • FMED Excess GTL Coverage Tax Employer Liability
    • FSOC Excess GTL Coverage Tax Withholding
    • FSOC Excess GTL Coverage Tax Employer Liability

Step 4: Process the taxable amount in Payroll Data Entry during the last payroll run of the year.

  1. Open Payroll, Main, Payroll Data Entry.
  2. After entering the normal earning code, select the Group Term Life Insurance earning code.
  3. In the Amount field, enter the appropriate taxable amount.
    • Note: Use the table in IRS publication 15-B. For current compliance requirements, consult your accountant or the IRS.
  4. Click Accept. Click Yes when prompted to take automatic deductions.
    Note: This offsets the earnings amount with the same deduction amount.
    Continue processing payroll as usual, and update the Check Register.

Step 4: There is no need to edit the Tax Summary Withholding Wages like was done in Legacy (2017 and prior Payroll).

Notes:
This information is provided as a courtesy only. For current compliance requirements, consult your accountant or the IRS.
Special rules apply for employer paid group term life insurance in excess of $50,000 for former employees who must pay the employee portion of Social Security and Medicare on Form 1040. The employer is not required to collect those taxes, but must report the uncollected Social Security tax with code ‘M’ and the uncollected Medicare tax with code ‘N’ in box 12 of the W-2.

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