Payroll Support Document

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Life Insurance Fringe Benefit

Life Insurance Over $50,000

The cost of Life Insurance over $50,000 is considered a fringe benefit to the employee and therefore must be reported on the W2 as a taxable fringe. This dollar amount has to be reported in boxes 1, 3 and 5 on the W2. If the Life Insurance was not set up as a fringe this year, you will have to make the following adjustments:

  • Go into the Payroll Module
  • Select "6. Employee Maintenance" from the Main Menu.
  • Select an employee
  • Go to the "Paytype" tab.

To set up a Fringe:

  • Click on "Add"
  • Click "Fringe Benefit"
  • Choose the Number/Letter that will refer to this Fringe Benefit.
  • Click "OK"
  • Continue by filling in all information
  • In the LTD field enter the dollar amount that it cost you, the employer, for premiums for coverage over $50,000.00
  • Click "Save" to save this Fringe Benefit.
  • Click on the "W4" tab
  • In the "W4" tab, in the field "Life Insurance Coverage Provided by Employer," put in the face value of the life insurance policy - i.e. 60,000
  • Click "Save" to save.
  • Click on the "History" tab.
  • In the "History" tab, adjust the employee's FICA and MEDI fields and the employer FICA and MEDI fields.
  • Click "Save" to save.
  • You will have to manually adjust your 941 for the employee and the employer FICA wages and MEDI wages
  • You will also have to do journal entries in the General Ledger for these FICA and MEDI adjustments

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