Expert: Shirley McAllister, CPP, PHR - 9/28/2010

Question
I do bookkeeping for a small nonprofit.  We've set up a 125 cafeterial plan for health insurance co-pays, and begun witholding wages via our local payroll company.  In Quickbooks Pro these have been set to create a liability account.  My questions(s):

How do I use/offset this account?  Do I use it to pay the medical insurance bills part of the time?  Do I pay it to the insurance provider monthly and they then credit it to my bill?  Do I instead simply do a journal entry to offset medical insurance expenses internally?  And if so, do I have to allocate it to each employee/grant manually in QB? Does the law dictate this, or simply accounting convention?

Answer
Is the Cafeteria 125 set up to provide medical insurance for the employees or simply to provide the co pay part of the insurance that they must pay. Is this an HRA account?

Whatever account this is set up to pay would be the offset of the liability account.

If it is insurance than your offset would be the insurance account.

Shirley