Reporting Adoption Assistance on the Employee's W2
- Former user (Deleted)
- Lori Nye
- Former user (Deleted)
An adoption assistance program is a separate written plan of an employer under which the employer provides employees with adoption assistance.
Adoption Assistance plan benefits can also be provided under a cafeteria plan (section 125 plan). Thus, employees may elect to make contributions for this on a pre-tax basis.
The type of adoption assistance provided by the employer is treated differently than Adoption Assistance Benefit Plans set up as Section 125. The type provided by the employer involves a cash payment made to the employee to cover the expenses of an adoption. If this type of adoption assistance is in place, the district must pay the employee the money through payroll so the payment is reported correctly. These payments should be made to the employee through the PAYROLL/PAYROLL PAYMENTS - CURRENT or PAYROLL/PAYMENTS-FUTURE program using a pay type of Adoption Assistance. These payments are reported in the following manner:
Exempt from Federal taxation
Exempt from Ohio taxation
Not exempt from Medicare taxation
Not exempt from ODJFS wages
Exempt from SERS/STRS
The type of cafeteria plan for adoption assistance is slightly different than other types of cafeteria plans supported by the software. The type for adoption assistance has a cash value and is treated as wages for medicare taxation purposes, where other cafeteria plans are not.
The CORE/PAYROLL ITEM CONFIGURATION program allows you to determine whether or not the Section 125 plans in place at your district are treated as wages or not. By default, all existing Section 125 plans will be treated as the non-wage type. When running PAYROLL ITEM CONFIGURATION, you will note two options for the Section 125's. If necessary, districts should contact their legal advisors for clarification as to whether or not their plan is to be treated as wages.
The CORE/PAYROLL ITEM CONFIGURATION program also allows you to enter in a PAYROLL ITEM type of "ADOPTION ASSISTANCE" for those Section 125 plans set up for adoption assistance. This change will cause during the payroll run, to treat section 125 plans correctly. The "ADOPTION ASSISTANCE" plan types will be handled in the following manner:
Exempt from Federal taxation
Exempt from Ohio taxation
Not exempt from Medicare taxation
Not exempt from ODJFS wages
Not exempt from SERS/STRS
The total amount is placed in Box 13 of the W2 form, with a code of "T" by REPORTS/W2 Report and Submissions.
To properly set up section 125 adoption assistance plans, a district must add the Payroll Item configuration record as an Adoption Assistance Type and flag it as a section 125 treated as wages Annuity Type.
Difference from Classic - If the Adoption Assistance Pay Type was NOT USED prior to the last pay of the calendar year, the Adoption Assistance (NC2) payment amount must be entered under the CORE/ADJUSTMENT JOURNAL in order for the Adoption Assistance amount to show correctly on the W2 form and to insure that the Quarter balances. The W2 Report will automatically adjust the Medicare and city, if applicable, the total and taxable gross amounts. The software provides the ability to withhold city tax on non-cash earnings. This can be activated by checking the "Tax Non Cash Earn" field on the city tax record in the CORE/PAYROLL ITEM CONFIGURATION program. No manual adjustments are needed.