Set up employee deductions for a Health Savings Account (HSA)

A Health Savings Account (HSA) holds tax-exempt money that an employee can use for out-of-pocket medical expenses. Employee are eligible to set up an HSA if they satisfy all federal requirements, such as participating in a High Deductible Health Plan (HDHP).

You and your employee can both contribute to the employee's HSA.

To set up employee deductions for an HSA:

1. In the left navigation bar, click Employees.
2. Click the employee's name, and then click Edit employee.
3. Under Does this employee have any deductions?, click the pencil icon to edit a deduction, or click Add a new deduction to add one.
4. Select either an existing HSA plan or click New deduction/contribution from the Deduction/contribution drop-down.
5. Select HSA plans for the type from the Deduction/Contribution type drop-down.
6. Select if the HSA deduction is taken out of the employee's paycheck before or after taxes were taken out from the Type drop-down:
   • Pretax HSA — select this if the deduction will be taken out of your gross pay (before taxes). Pretax contributions aSet up employee deductions for a Health Savings Account (HSA)re reported in Box 12 of Form W-2 but excluded from federal wages and most state wages. (If they are taxable at the state or local level, we include the amount in taxable wages.)
   • Taxable HSA — select this if the deduction will be taken out of your net pay (after taxes). Taxable employee contributions are not reported on Form W-2.
7. Enter the description that appears on the paycheck.
8. Select $ amount or % of gross pay for the Amount per pay period, and then enter the dollar amount or percent of the deduction per paycheck for this employee.
9. Optionally, enter the annual maximum for this deduction.
10. Click OK.

You're responsible for determining an employee's eligibility and annual maximum for HSA contributions. We don't automatically limit the annual maximum for you, because plans vary widely. The maximum total annual contribution from the employee (pretax plus taxable) and you is their HSA plan deductible or the current IRS limit, whichever is lower.

See also

• Health Savings Account (HSA) overview
• Set up company contributions to a Health Savings Account (HSA)
• Health Savings Account contribution limits
• Payroll topics

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