Instructions for EMPLOYERS - How to facilitate HSA contributions through payrollgroup meeting

So you’ve decided a Qualified Deductible Health Plan (QDHP) is a good option to offer your employees as part of your group sponsored health plan.  To compliment that, you have also decided to offer your employees the ability to open a Health Savings Account (HSA) and you will help them by deducting money from their paycheck. 

There are just a few things you need to know before you get started.

  1. A HSA is not a group sponsored health plan like many of the other benefits you offer.  An HSA is an account solely owned by your employee.  Once the money (employee and employer) goes into that account it belongs to the employee.  You will be able to track your money until it goes into their accounts but after that, you will not be able to have any information related to that account including balance or activity information.  You as the employer are just a facilitator to move money from their paycheck to their HSA account.  This account is portable and it will remain the property of the employee if they leave the company.  The good news for you as an employer is you do not have any reporting or other HIPAA related requirements you must meet.

  1. You will save money by allowing employees to deduct their HSA Contributions pre-tax but the only way you can do that is to adopt a Section 125 Flexible Spending Account (sometimes called a Cafeteria Plan).  Once the Section 125 Flexible Spending Plan is adopted, you can deduct HSA contributions through payroll and employees will no longer have to pay Federal, State, or FICA taxes on that money and you as an employer will no longer have to pay matching FICA taxes on that money. 

  1. If you as an employer are contributing to the employee’s account, you will have no assurance that the money you put in their account was used for Qualified Medical Expenses as defined by the IRS.  Employees will be responsible for their own bookkeeping and they will be responsible for keeping their own receipts.  If your employees are not good at keeping this detail, you might want to rethink this option as it could get them in trouble with the IRS. In addition, employees are allowed to withdraw money from their account for ANY REASON.  However, if the money is not used for proper medical expenses, they will have to pay Federal and State taxes on the withdrawal plus a 20% penalty.

We highly recommend that a comprehensive education program be put into place before employees sign up.  IRS rules related to HSA’s can be lengthy and confusing.  The last thing you want as an employer is to have someone sign up for an account and find out later that they weren’t eligible to participate.  Fixing an error like that is sometimes fixable but would involve some work on the employees’ part and your part to fix payroll.  It’s better to understand the rules upfront before employees sign-up.

We are here to help!  Click below and this will take you directly to step-by-step instructions on how we will get your group set up.  In addition, after you sign up, your employees will have the ability to enroll online all year long, you will be billed directly for our administration fees and you will be able to post contributions and/or payments online or send them to us through the mail.  It will be your choice.

In addition, since we believe that training is a very important part of this program, we will also provide you a PowerPoint presentation to help you train your employees and the deduction forms you need for them to authorize payroll deduction. 

We are a leader in the HSA group market and pride ourselves in great customer service.  Feel free to CONTACT US with any questions.

Apply Now