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ISSUE 6
For example, there are high-deductible plans employers can offer that allow tax- free contributions to employee health savings accounts, or HSAs. Money in these accounts may accumulate like a retirement account but can only be used on health-related expenses. Annual maximum HSA contributions are set each year, however, payroll needs to track those contributions, carry out required special reporting for these plans, and tax amounts that exceed those limits, too. Enrollment Cycles There are a few windows under which individuals can enter or change healthcare coverage. Employees may enroll in the employer’s plan after being hired (with or without a waiting period); experiencing a qualifying life event such as the birth of a child, marriage, gain/loss of coverage; and/or during the employer annual benefit enrollment event. Annually, there is “open season,” a chance for employees to modify their plan choices. Employers use this period to roll out new features, explain coverage changes, and more. Keep in mind, while medical is the most common elected benefit at enrollment time, U.S. employers often bundle dental, vision, life insurance, medical savings accounts, legal and identity protection services, and critical illness programs into their offerings, to name a few. A Six-Month Plan for Success As an employer, planning the annual benefit enrollment can be
“ To help mitigate the potential cost, employers may offer a variety of insurance coverage products for purchase via payroll deduction. ” Healthcare Via Payroll Deduction To help mitigate the potential cost, employers may offer a variety of insurance coverage products for purchase via payroll deduction. Any amounts paid by employers for health coverage are not taxable to employees. It’s a tax-free fringe benefit. Employers also can offer plans that allow employees to set aside from their wages tax-free amounts they can use only on medically-related costs not covered by insurance. Despite being not taxable, payroll must track costs for health coverage—both employer and employee amounts— and report the combined amount annually on Form W-2, Employee Wage and Tax Statement. Other healthcare costs also may involve payroll, depending on the type of plan the employer offers.
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