How To Handle HSA Contributions When It Comes To Payroll
GUEST BLOGGER: Gordon Mulder - Pacific Payroll Group
One of the many reasons you likely use an agent like Steve, is to handle the (sometimes tedious) analyses of health plans and how best to save money. So I’ll make this blog a fast skim and answer the bottom line questions. 😊
Why Should a Business Consider Using a Health Savings Account (HSA)?
Many businesses offer HSA’s to their employees because they provide multiple ways to save for both the employer and employee.
These medical savings accounts are combined with high deductible health plans (HDHPs) so the premium is lower - and the money contributed to the HSA is tax-free. These accounts earn interest tax-free - and the withdrawals are tax-free. 💵 Impressive!
The funds in the HSA can be used for qualified healthcare expenses. (Ask your friendly insurance agent or CPA about what’s considered a qualified expense.)
Companies have options when it comes to their level of involvement. For example, some employers can help fund the employee’s HSA account. Other employers will offer employees a payroll deduction to fund the account, but do not provide any direct contributions.
So, how is this handled when it comes to payroll?
Employers often think HSA’s are complicated when it comes to payroll, but it’s easier than you think.
If you have a payroll service for your business, they will administer the HSA plans and issue payments (which includes exporting the related reporting data to third-party HSA benefit administration firms).
The payroll summary report all clients get with payroll will automatically list the HSA separately - and clearly - so employers do not have to search for the amount when it comes time for bookkeeping or reporting.
Your payroll provider can facilitate the HSA contribution, just like a direct deposit for the client / employees, creating a seamless process with little room for error or delays.
It’s easy to automate your HSA administration -- and avoid the hassle (and compliance risks that can occur from manual errors) when you have a payroll service track the contributions.
Making An Employer’s Life Easy
Like with a payroll direct deposit, the funds associated with the HSA are transferred electronically with your ACH processor and the Federal Reserve System. There is no need to have to remember to initiate a bank transfer or wire to fund your HSA or retirement account on the due date.
A Final Note on S-Corps
Not all payroll companies will handle S-Corps due to their smaller size, but my firm welcomes these accounts - and it’s easy to handle their retirement contributions and medical or health savings accounts.
Just like an employer with multiple employees, by integrating the related payroll components and being able to electronically pay the retirement or HSA with payroll, it helps save the S-Corp time and ensures everything is handled accordingly, on time. This helps the CPA perform their financial analysis more efficiently.
We here at Pacific Payroll Group are happy to work with JS Downey Insurance Service and answer any questions related to payroll, deductions, compliance, HR, or anything else on your mind. If you have a question on how to handle HSA’s even if you handle payroll by yourself, feel free to contact us - we’d love to hear from you!
Gordon began his career as a payroll & personnel manager with a Fortune 500 company in the 1990’s processing payroll, time cards and reviewing employee documents to ensure compliance at the State and Federal level.
Upon leaving the corporate world, he earned his Bachelor’s degree (Business Administration – Entrepreneurship) from Wayne State University in Detroit.
Prior to starting Pacific Payroll Group in 2008, Gordon had worked in management for other payroll service bureaus focusing on client relations, internal employee training and payroll tax inquiries. Gordon truly enjoys working with his clients, some of whom have followed him from company to company over the years.
Originally from the Midwest, Gordon enjoys home DIY projects, wine, cooking and is an avid equestrian.