USA Employee Health Deductions/Health insurance expense

[BetaCuck42069]

I have a new job in corp accounting. I was tasked with looking into why a balance sheet variance exists related to health insurance. This problem starts in July when they started recording health insurance this way opposed to how they did prior to July(which was booking the monthly health insurance invoice to health ins exp, and then on payroll the employee withheld portion of the premium was credited to a contra exp account)

Starting in July they started booking the entire health insurance invoice payment to a liability account called EE health deductions.

So now payroll entries credit this EE health deductions account for the withheld amount.

And then they tally up the the ER portion of each premium on this payroll entry roster, use that figure to Debit Health Insurance Exp and Credit EE health deductions

I tell the guy the variance is due to the health insurance expense not necessarily correlating perfectly like that due to several different scenarios

is this a common way to record deductions/health insurance?

 

[kirby]

Not that I have seen.
Suggest you perform an Excel analysis. Show the entries (in summary) for the method currently used side by side with the old method. Then use this to try to figure out what is happening differently analytically.

 

[BetaCuck42069]

Not that I have seen.
Suggest you perform an Excel analysis. Show the entries (in summary) for the method currently used side by side with the old method. Then use this to try to figure out what is happening differently analytically.

Yea it looks similar all except including health insurance expense in the entry on the debit side and this employee health deductions liability account on the credit side. Liability account gets credited for the actual health deductions in the pay cycle + ER portion of each individual premium. ER portion tallied up gets debited and that is the health insurance expense.

the total amount of the invoices, which is a debit to the liability account when it gets posted, appears to exceed the recognized health insurance expense each month and so this debit balance liability account increases each month.

My opinion is that they are getting way too caught up in the “ER” and “EE” crap thinking it is something they can pinpoint when health insurance is just a cost of doing business and there will always be scenarios where health insurance expense exists related to someone not on the pay cycle. Control it from the invoice side and make sure everyone who should be off is off but other than that just put the f’n deductions to a contra expense account

 

[ftompkinms]

Could it be that there is a fluctuation due to the fact that insurance premiums are paid monthly, and the employee contributions are bi-weekly meaning that two contributions will not add up to the monthly cost?