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  • #16
    What is the clarification on the above scenario? I am offering a HSA qualified medical plan to my staff next year and they may like me to direct deposit their contributions to their HSA account if it saves them FICA. I am not contributing to their HSA but if it saves FICA for both sides, I may discuss various options possible with them. What is the interpretation of that rule? Appreciate your input.

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    • #17
      If you have an employee benefit plan where the employee HSA elections are treated as salary reductions and the contributions are actually made by the employer, they are not subject to income tax withholding and FICA.

      If on the other hand, you are simply direct depositing from their net paycheck. The contributions are after-tax/FICA and deducted on their tax return.

      In the former the contributions are not subject to FICA, in the latter they are.

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      • #18




        If you have an employee benefit plan where the employee HSA elections are treated as salary reductions and the contributions are actually made by the employer, they are not subject to income tax withholding and FICA.

        If on the other hand, you are simply direct depositing from their net paycheck. The contributions are after-tax/FICA and deducted on their tax return.

        In the former the contributions are not subject to FICA, in the latter they are.
        Click to expand...


        Does that mean the base pay for the employee has to be less by the amount of the HSA contribution? In which case, it may impact other components like overtime rate, 401k contributions etc that depend on the base pay right?

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        • #19


          Does that mean the base pay for the employee has to be less by the amount of the HSA contribution? In which case, it may impact other components like overtime rate, 401k contributions etc that depend on the base pay right?
          Click to expand...


          Here we go again.

          What spiritrider means when s/he says that "the contributions are actually made by the employer, they are not subject to income tax withholding and FICA" is that the contributions come out of the employer's pocket or the employer is making contribution on behalf of an employee who is contributing via a section 125 plan. If the employer makes contributions that the employer has simply withheld from the employee's net pay as a convenience to the employee, the contributions are subject to FICA. Given the wording of your original question (#86126 above), my interpretation is that you are simply withholding the HSA contributions but do not have a section 125 (cafeteria) plan in place.

          The base pay should not be affected regarding overtime rate, 401k contributions, etc.
          Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #20
            Not to hijack the thread, but this is a very relevant question...

            I am currently on my wife's health insurance.  Her employer does not offer an HSA option.  My employer does, but since I'm not on that insurance, obviously I can't contribute to it through my employer.

            What I'd like to do is set up a new HSA for my wife and I so I can contribute the full 6900 in 2018.  I'd then transfer my current HSA to that one so we have it all in one place.  This is all okay correct?

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            • #21
              It is not clear what your situation is.

              You state that you are on your wife's plan, but her employer does not offer an HSA. Is that because they just don't offer an HSA (unusual) or because she doesn't have an HSA qualifying HDHP?

              If it is the former and neither of you is an otherwise HSA ineligible individual, then either or both of you can make the combined limit.

              If it is the latter neither of you can make contributions.

              Also, HSA accounts are Individual accounts. You can only roll over between like owned accounts.

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              • #22







                Does that mean the base pay for the employee has to be less by the amount of the HSA contribution? In which case, it may impact other components like overtime rate, 401k contributions etc that depend on the base pay right?
                Click to expand…


                ? Here we go again.

                What spiritrider means when s/he says that “the contributions are actually made by the employer, they are not subject to income tax withholding and FICA” is that the contributions come out of the employer’s pocket or the employer is making contribution on behalf of an employee who is contributing via a section 125 plan. If the employer makes contributions that the employer has simply withheld from the employee’s net pay as a convenience to the employee, the contributions are subject to FICA. Given the wording of your original question (#86126 above), my interpretation is that you are simply withholding the HSA contributions but do not have a section 125 (cafeteria) plan in place.

                The base pay should not be affected regarding overtime rate, 401k contributions, etc.
                Click to expand...


                Johanna,

                That is correct. We currently do not have a Section 125 (cafeteria) plan or a HSA qualified med insurance plan for 2017. However for 2018 we are moving to a HSA qualified plan so I am trying to understand possibilities. So far I am encouraging my staff (including myself) to open HSA accounts at a personal level and fund them and then take the deduction at tax time. However if there are additional advantages (as it appears to be) with a Section 125 plan I do want to consider options that dont involve increasing payroll.

                HI

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                • #23




                  It is not clear what your situation is.

                  You state that you are on your wife’s plan, but her employer does not offer an HSA. Is that because they just don’t offer an HSA (unusual) or because she doesn’t have an HSA qualifying HDHP?

                  If it is the former and neither of you is an otherwise HSA ineligible individual, then either or both of you can make the combined limit.

                  If it is the latter neither of you can make contributions.

                  Also, HSA accounts are Individual accounts. You can only roll over between like owned accounts.
                  Click to expand...


                  I'm on my wife's employer's HDHP starting Jan 1st 2018, but they don't offer an HSA to their employees (I agree it is unusual).  They offer an FSA, but we don't participate in that.  Our HDHP is eligible for HSA contributions.  They just don't offer an HSA plan to their employees.  Does that make sense?

                  SO, what you are saying is that each of us can open an individual HSA account AND contribute the full family amount each year? (6900 in 2018) So, technically we'd be allowed to contribute 6,900 to my individual account AND 6,900 to her individual account?  I didn't know that.  That's awesome if so.

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                  • #24


                    SO, what you are saying is that each of us can open an individual HSA account AND contribute the full family amount each year? (6900 in 2018) So, technically we’d be allowed to contribute 6,900 to my individual account AND 6,900 to her individual account?  I didn’t know that.  That’s awesome if so.
                    Click to expand...


                    No, you have a "per family" limit. As spiritrider said:

                    • Either of you [individually] can make the combined limit, or

                    • Both of you [together] can make the combined limit

                    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #25
                      Until I read this article, I did not completely understand what Johanna and Spiritrider was saying. According to Option 2 of this article http://www.benefitspro.com/2017/11/15/5-facts-about-hsas-and-cafeteria-plans?slreturn=1513617938&page=4&page_all=1 , by establishing a cafeteria plan and deducting contributions every paycheck, both employee and employer will get relief from payroll taxes even if employer is not contributing to the HSA account out of their own pocket.

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