Health Savings Account (HSA) Plan Benefits

Differences between Health Savings Account and Flexible Spending Account Plans

Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) plans are both tax-advantaged accounts to help employees save money to pay for qualified healthcare expenses. However, only employees with a High Deductible Health plan (HDHP) can select an HSA.

Employees can be enrolled in an HSA plan and an FSA dependent care plan, and/or FSA limited purpose (for vision and dental) at the same time. The key differences between HSA and FSA plans are described in the following table.

Important Contribution limits and other details related to HSA and FSA plan benefits are subject to change by the IRS. Visit the IRS webpage for the most current details.


Topic	Health Savings Account (HSA)	Flexible Spending Account (FSA) Medical	Flexible Spending Account (FSA) Dependent Care
Eligibility requirements	Eligibility requirements include having a high-deductible health plan (HDHP).	None	None
Contribution limit	2023 contributions capped at $3,850 for individuals or $7,750 for families. 2024 contributions capped at $4,150 for individuals or $8,300 for families. Note: When a plan is changed from an individual to a family HSA or vice-versa, review the employee's maximum goal amount to ensure that the revised HSA maximum goal reflects the amount the employee has already contributed to the previous deduction/benefit plan. The goal to date amount does not carry over automatically from one plan to another for mid-year plan changes.	2023 contributions capped at $3,050 2024 contributions capped at $3,200	2023 and 2024 contributions capped at $5,000 per household or $2,500 if married, filing separately.
Changes to contribution amount	Contribution amounts can be changed at any timing during the plan year.	Contribution amounts can be changed during open enrollment or with a qualifying life event, such as a change in employment or family status.	Contribution amounts can be changed during open enrollment or with a qualifying life event, such as a change in employment or family status.
Rollover	Unused balances roll over into the next year.	Unused balances are forfeited, but there are some exceptions.
Connection to employer	An HSA follows the employee with a change in employment.	An FSA is typically lost with a change in employment, however, an employee may be eligible for FSA continuation through COBRA.	An FSA is typically lost with a change in employment.
Fund availability	Must have sufficient funds available before funds can be used for medical expenses.	FSA does not need to be fully funded before funds can be used. Expenses can be applied to the account, even on the first day.	FSA must be fully funded before funds can be used.
Funds and healthcare expenses	Funds can only cover medical, dental, prescription, and vision expenses.	Funds can cover medical, dental, prescription, and vision expenses.	Funds can cover expenses applied toward the care of a qualifying dependent. For example, daycare and nursery school expenses. Note Visit the IRS website for more details.
Effect on taxes	Contributions are tax-deductible, but can also be taken out of your pay pretax. Growth and distributions are tax-free.	Contributions are pretax, and distributions are tax-free.	Contributions are pretax, and distributions are tax-free.

HSA Contribution Limits and Deduction Goal Amounts

Employers can use Health Savings Account (HSA) tax categories to configure HSA plans. HSA contribution limits are set by the IRS and indexed annually.

The maximum annual HSA contribution limits for individuals, family, and catch-up (55 years of age or older) are set by the IRS and indexed annually. Yearly deduction goal limits must not exceed statutory limits and employer contributions must be subtracted from the maximum goal amount configured for HSA plans in the UKG Pro solution. When changing a maximum goal limit for calendar year benefit plans (yearly goal), use the Pending Effective Date if this date falls on or after January 1. When changing a maximum goal amount limit for mid-year plans (continuous goal), use January 1 as the effective date.

Health Savings Account (HSA) Tax Categories

Employers can use six Health Savings Account (HSA) tax categories to configure HSA plans. Refer to the table for tax category descriptions and details.

Important Contribution limits and other details related to HSA and FSA plan benefits are subject to change by the IRS. Visit the IRS webpage for the most current details.

Tax categories with the tax year in the description are updated automatically based on new, annual IRS statutory limits for HSAs. Review these key considerations before you configure HSA plans:

When you configure HSA plans, use these four separate tax categories to ensure limits are automatically updated annually:
- HSA Family <YEAR> tax year.
- HSA Family with Catchup <YEAR> tax year.
- HSA Individual <YEAR> tax year.
- HSA Individual with Catchup <YEAR> tax year.
When employers make contributions to HSA plans, and contributions are the same for all employees, reduce the maximum goal amount by the annual employer contribution amount. For example, if the annual employer contribution to the HSA plan is $500, subtract $500 from the maximum goal of $3,350.00. The revised maximum goal amount to configure would be $2,850.00. Employer contributions must be subtracted from statutory limits to ensure HSA plans do not exceed IRS limits. Refer to the Updating a Deduction Goal Amount Quick Tour for instructions on updating goal amounts in UKG Pro.
It is optional in certain cases to use only two tax categories for HSA and HSA Catchup. If you need help to determine which tax categories are appropriate, create a case by accessing the UKG Ultimate Community and selecting Support & Services.


Plan Code	Tax Category	Deduction Type	Limits ($)	W-2 Box	W-2 Label	Maximum Goal Amount Set Automatically?	Contingency Linking Specific to HDHP
HSAF	HSA Family 2023	Health Savings Account	7,750.00	12	W	Yes	Yes
HSAF	HSA Family 2024	Health Savings Account	8,300.00	12	W	Yes	Yes
HSAFC	HSA Family w/Catch-up 2023*	Health Savings Account	8,750.00	12	W	Yes	Yes
HSAFC	HSA Family w/Catch-up 2024*	Health Savings Account	9,300.00	12	W	Yes	Yes
HSAI	HSA Individual 2023	Health Savings Account	3,850.00	12	W	Yes	Yes
HSAI	HSA Individual 2024	Health Savings Account	4,150.00	12	W	Yes	Yes
HSAIC	HSA Individual w/Catch-up 2023*	Health Savings Account	4,850.00	12	W	Yes	Yes
HSAIC	HSA Individual w/Catch-up 2024*	Health Savings Account	5,150.00	12	W	Yes	Yes
HSA	Health Savings Account	Health Savings Account	manually set	12	W	No, manually set	Yes
HSACU	Health Savings Account Catch Up	Health Savings Account	1,000.00	12	W	No, manually set	Yes

Note

*Certain states consider HSA Catch-up contributions as a taxable benefit. Since the tax categories include the taxable benefit as part of the calculation, employers do not need to configure any additional Deduction/Benefit plan codes.

HSA Plans, Plan Contingencies, and Configuration

Review plan options to identify steps to configure HSA plans for your organization's employees.

Before you begin, consider the types of plans you offer employees. Depending on your benefit plan design, several configuration options are available in the UKG Pro solution. Review the list of options to ensure configured plans meet your organization’s requirements and comply with the latest statutory requirements.

Plan contingencies are used to control which combinations of elections are allowed based on the plan design. All plan contingencies are configured with a parent plan and one or more child plans. During Open Enrollment or Life Events sessions, employees are required to first enroll in one plan (the parent deduction/benefit plan) to become eligible to enroll in another plan (the child plan), which is the contingency or linked plan. By using plan contingencies, administrators can prevent invalid elections. Configured plan contingencies in the UKG Pro solution ensures that employees can't enroll in a Health Savings Account unless they have chosen a high-deductible health plan.


Plan Options		Plan Options		Configuration
Do you have multiple deduction/benefit groups with same HDHP	Yes	Do you use contingencies (or linked plans)?	Yes	Each child plan requires the related parent plan to share the same deduction/benefit group. In an Open Enrollment or Life Event session, child plans cannot be separate from the parent plan. In each Open Enrollment or Life Event session, the parent plan must be elected in each session (even if the employee is already enrolled in the plan) when the child plan is linked. Note: The system does not consider benefits that the employee already has in place. Configure a set of HSA plans, which includes these four plan types with a corresponding tax category: HSA Individual <YEAR> HSA Individual with Catchup <YEAR> HSA Family <YEAR> HSA Family with Catchup <YEAR> Link the HDHP and HSA Plans. Ensure HDHP is the parent plan and HSA plans are child plans. Multiple linked plans are generally configured. Configure contingency rules to be parent option to child plans, such as: Employee only benefit option from HDHP to HSA individual plan and to HSA Individual with Catchup. Family benefit option from HDHP to HSA family plan and to HSA Family with Catchup.
Do you have multiple deduction/benefit groups with different HDHP	Yes	Do you use contingencies (or linked plans)?	Yes	Each set of child plans require the related parent plan to share the same deduction/benefit group. In an Open Enrollment or Life Event session, child plans cannot be separate from the parent plan. In each Open Enrollment or Life Event session, the parent plan must be elected in each session (even if the employee is already enrolled in the plan) when the child plan is linked Note: The system does not consider benefits that the employee already has in place. Configure separate sets of HSA plans for each of the different HDHPs per deduction/benefit group. Include these four plan types with a corresponding tax category: HSA Individual <YEAR> HSA Individual with Catchup <YEAR> HSA Family <YEAR> HSA Family with Catchup <YEAR> Link the HDHP and HSA Plans. Ensure HDHP is the parent plan and HSA plans are child plans. Multiple linked plans are generally configured. Configure contingency rules to be parent option to child plans, such as: Employee only benefit option from HDHP to HSA individual plan and to HSA Individual with Catchup. Family benefit option from HDHP to HSA family plan and to HSA Family with Catchup.
Do you have multiple deduction/benefit groups with a HDHP	Yes	Do you use contingencies (or linked plans)?	No	Configure one set of HSA plans to include these four plan types with a corresponding tax category: HSA Individual <YEAR> HSA Individual with Catchup <YEAR> HSA Family <YEAR> HSA Family with Catchup <YEAR> As part of a conceptual contingency approach, it is recommended to follow these two steps: Review and audit elections to validate accuracy.
Do you offer employer contributions?	Yes			Configure earnings codes for employer contributions.
	No			Earnings codes are not needed.
Do employer contributions differ based on deduction/benefit groups?	Yes			Configure an earnings code and multiple sets of HSA plans. Include these four plan types (one set for each deduction/benefit group) with a corresponding tax category: HSA Individual <YEAR> HSA Individual with Catchup <YEAR> HSA Family <YEAR> HSA Family with Catchup <YEAR> Maximum goal amount set for each HSA plan must reflect the IRS maximum contribution limit minus the employer contribution. After employee has elected a HDHP, add the earnings code to the employee’s record by: A payroll import using an excel spreadsheet. Entering the code manually on the employee’s record (Employee Admin > Pay > Earnings). When adding the HSA Employer Contribution (Earnings code) to the employee record, the amount must equal the amount of the employer contribution.
	No			If employer contributions are the same for all employees and all deduction/benefit groups contain the same HDHP, then one set of HSA plans may be configured. Configure an earnings code.
Do you offer HDHP and HSA plans in an Open Enrollment or Life Events session?	Yes	Do plans use HSA tax categories with tax years?	Yes	When multiple HSA plans are configured, then: Configure the HSA deduction/benefit type to disallow multiple deductions by unchecking the Allow multiple deductions box. Note: This limits elections to one plan type by displaying all HSA plans on the same election page. If configured contingencies are used, include all parent plans in each Open Enrollment and Life Event sessions.
		Do plans use HSA tax categories with tax years?	No	When multiple HSA plans are configured, then: Configure the HSA deduction/benefit type to allow multiple deductions by checking the Allow multiple deductions box. Note: This allows election to both the HSA and HSA Catchup by displaying plans on separate election pages. If configured contingencies are used, include all parent plans in each Open Enrollment and Life Event sessions.

High-Deductible Health and HSA-Linked Plans Configuration

Review the steps to configure HDHP and HSA-linked plans for your organization's employees.

For HSA-qualified high-deductible health plan (HDHP), it is recommended you first configure the HDHP and then, due to differing goal amounts, configure Health Savings Account (HSA) plans using the HSA tax categories: Individual, Individual catch-up contributions, Family, and Family catch-up contributions.

Administrators can use configured or conceptual contingencies. Parent plans must not be separate from child plans, if configured contingencies are used. Configured contingencies use the Plan Contingencies icon to link plans together. This ensures that only those employees who enroll in the High Deductible Health Plan have the option of enrolling in the Health Savings Account plans during Open Enrollment or Life Events.

Elections are validated during the election process so it is important to note that when contingencies are configured, employees must always re-elect a HDHP. The UKG Pro solution does not verify the elections currently on an employee's record.

In cases where dependents are included as part of the HDHP, dependents must be re-enrolled to change contributions for the HSA during the year if using a Life Event.

In contrast, conceptual contingencies use messaging to help guide employees during the election process. In addition, administrators must review and audit after elections have been completed to ensure accurate elections.

Some employers prefer to use conceptual, instead of configured contingencies.

Health Savings Account plans are linked to high-deductible health plans in the UKG Pro solution by following these main steps:


Step	Task	Description	Tax Category	Notes
1.	Configure the High-Deductible Health Plan (HDHP) Code	Employee contributions to HDHP plans are configured using deduction/benefit plan codes	Use tax categories under Section 125 for individual contributions.	For medical plans, typically Section 125 is used as a pre-tax plan. Some employers offer post-tax plans, which would be configured with Voluntary Withholding.
2.	Configure the Health Savings Account (HSA) Plan Codes	Employee contributions to HSA plans are configured using deduction/benefit plan codes.	Use HSA Individual <YEAR> on an HSA plan code for individual contributions.	Configure a separate deduction/benefit plan code for HSA Individual with a flat amount calculation rule and check Use Rate at Employee Level.
			Use HSA Individual w/Catch-up <YEAR> on an HSA plan code for individual catch-up contributions.	Employees must meet the annual age requirement to be eligible for additional HSA contributions. Benefits administrators must configure a separate deduction/benefit plan code for HSA Individual catch-up with flat amount calculation rule and check Use Rate at Employee Level.
			Use HSA Family <YEAR> on an HSA plan code for family contributions.	Configure a separate deduction/benefit plan code for HSA Family with flat amount calculation rule and check Use Rate at Employee Level.
			Use HSA Family w/Catch-up <YEAR> on an HSA plan code for Family catch-up contributions	Employees must meet the annual age requirement to be eligible for additional HSA contributions. Benefits administrators must configure a separate deduction/benefit plan code for HSA Family catch-up with flat amount calculation rule and check Use Rate at Employee Level.
3.	Configure the Health Savings Account (HSA) - Employer Contributions - Earnings Code	To accurately report employer contributions in Box 12 of Form W-2, a separate earnings code must be configured.	Use "Health Savings Account Update"	Do NOT use a deduction/benefit plan to make employer contribution. You MUST use an earnings code to ensure accurate tax reporting.
4.	Add Earnings Code	To accurately report, manually add the earnings code to the employee. An import can also be done using an XLS spreadsheet.		The earnings code should reflect the amount of the employer's contribution.

Configure a High-Deductible Health Plan

Employers can configure a HDHP for their organization's employees.

A high-deductible health plan is a health insurance plan with lower premiums and higher deductibles than a typical health plan.

Navigation:Menu > System Configuration > Business Rules > Deduction/Benefit Plans

From the Deduction/Benefit Plans business rule page, select the Add Deduction/Benefit Plan button.
From the Main page, complete the Deduction Setup details.
Select the Deduction Type. For a high-deductible health plan, select Medical.
Select the Tax Category that meets your company's needs. Select Section 125 or Voluntary Withholding.
Select the calculation rule of Option/Rate.
Add new rates with an effective date equal to the pending effective date of the Open Enrollment session or the pay date of the first check where the new rates must appear.
The effective date of the rates is compared to the pay date, and if equal to or greater the new rates apply to that pay date. For Open Enrollment, the new rate's effective date should be equal to the pending effective date of the open enrollment session.

Configure a Health Savings Account Plan

Employers can configure a HSA plan for their organization's employees.

A health savings account is a medical savings account available for employees who are enrolled in a high-deductible health plan.

Navigation:Menu > System Configuration > Business Rules > Deduction/Benefit Plans

From the Deduction/Benefit Plans business rule page, select the Add Deduction/Benefit Plan button.
Complete the Deduction Setup details on the Main page.
Select the Deduction Type Health Savings Account.
Select the appropriate HSA tax category with the year that meets your company's needs.
Tax categories with the year ensure the correct taxation is applied and sets the statutory goal maximum amount to the IRS limit for the selected year.
Determine the correct maximum goal amount by using the formula below:

IRS Limit + Catchup (if appropriate) - Employer Contribution = Goal Amount
Use a calculation rule of Flat amount. Make sure to check the Use Rate at Employee Level option.
Determine whether to use configured or conceptual contingencies.
- If using configured contingencies, identify and configure the parent options for the HDHP and the HSA child plans.
- If using conceptual contingencies, add appropriate messaging to the associated Medical and Health Savings Account Deduction/Benefit Types text boxes.

Review HSA-Linked Plans

HSA-linked plans must be checked for accuracy and linked correctly to ensure successful employee enrollment.

Benefits administrators can review and audit HSA-Linked Plans by using two Business Intelligence reports (Public Folders > UltiPro BI Content > UltiPro BI for Core HR and Payroll > UltiPro Delivered Reports > Open Enrollment). Use the:

Linked Plans Deduction Setup Report to review setup details and plan links before Open Enrollment; and
Employee Linked Plan Comparison for Open Enrollment Report to compare linked plans for each employee and ensure accurate employee enrollment

This document and all information contained herein are provided to you "AS IS" and UKG Inc. and its affiliates (collectively "UKG") make no representation or warranties with respect to the accuracy, reliability, or completeness of this document, and UKG specifically disclaims all warranties, including, but not limited to, implied warranties of merchantability and fitness for a particular purpose. The information in this document is subject to change without notice. The document and its content are confidential information of UKG and may not be disseminated to any third party. No part of this document or its content may be reproduced in any form or by any means or stored in a database or retrieval system without the prior written authorization of UKG. Nothing herein constitutes legal, tax, or other professional advice. All legal, tax, or other questions or concerns should be directed to your legal counsel, tax consultant, or other professional advisor. All company, organization, person, and event references are fictional. Any resemblance to actual companies, organizations, persons, and events is entirely coincidental.

Configure and Review Health Savings Account (HSA) Plans

Configure and Review Health Savings Account (HSA) Plans