Linking an employee health savings account (HSA) deduction to a direct deposit allocation

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The following procedure explains how to link employees' health savings account (HSA) deductions to unique direct deposit allocations, and then make a deposit on behalf of your client's employees for their health savings accounts. Note that you can also use this procedure to handle alimony payments coming out of an employee's account to be deposited into an ex-spouse's account.

  1. Set up a vendor record for the client's HSA vendor in the Setup > Vendors screen, if one does not already exist.
    • Payroll Agent must be selected in the Vendor type field in the Main tab.
    • Direct Deposit must be selected in the Method field in the Payment Preferences section.
    • You do not need to complete information in the Direct Deposit tab for the vendor.
  2. Set up a payroll item (Deduction type) for the health savings account in the Setup > Payroll Items screen, if one does not already exist.
  3. In the Payroll Items tab of the Setup > Employees screen, make the HSA payroll item active on the employee by marking the Active checkbox next to the HSA deduction item for that employee.
  4. Click the Ellipsis button button next to the HSA deduction item to open the Employee Payroll Item Settings dialog.
  5. In the Direct Deposit section, create and save a direct deposit allocation for this payroll item by entering the appropriate direct deposit information associated with this employee.

When you pay the liabilities for the HSA vendor associated with this payroll item, the application creates a separate 6 Record ACH transaction for each employee direct deposit allocation specified in the Employee Payroll Item Settings dialog.

Notes

  • If employees don't have a direct deposit allocation set up for the payroll item, the application will use the vendor's direct deposit allocation to create a 6 Record ACH transaction. If the vendor is not set up for direct deposit, the application will print paper checks for those employees.
  • If the client matches the employees' contributions to an HSA account, you can follow the same procedure listed above using a health savings account match employer contribution item.

See also: Direct deposit overview

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