CALIFORNIA PAYROLL CONFERENCE Topics: FSA/HSA, Fringe Benefits Agenda

CALIFORNIA PAYROLL CONFERENCE Topics: FSA/HSA, Fringe Benefits Agenda

CALIFORNIA PAYROLL CONFERENCE Topics: FSA/HSA, Fringe Benefits Agenda Overview Topic Content FSA/HSA

FSA Permissible benefits payable Administration rules Year End excess amounts: Rollover v. Refund HSA Fringe Benefits Popular nontaxable Popular taxable

Difference in the type of plans Who can participate When they can choose to participate When is too late to participate Relevant annual limits Payrolls role in participation Employees role in participation Permissible benefits payable Administration rules Year end excess amounts: Rollover v. Refund 1040 Presentation (non-payroll) Federal v. State Taxation Audit activity in this area for all of these (Federal & State) Copyright 2017 Deloitte Development LLC. All rights reserved.

Presentation title [To edit, click View > Slide Master > Slide master1] 2 FSA/HSA Copyright 2017 Deloitte Development LLC. All rights reserved. 3 HSA Required to Participate High Deductible Health Plan

No Other Health Insurance Not Enrolled in Medicare Not a Dependent on Someones Tax Return Any amount of Income or no Earned income at all is OK Copyright 2017 Deloitte Development LLC. All rights reserved.

Presentation title [To edit, click View > Slide Master > Slide master1] 4 FSA Who Can Participate/Who Cannot? Employees Sole Proprietors >2% owners of an S Corp Members of an LLC Copyright 2017 Deloitte Development LLC. All rights reserved.

Presentation title [To edit, click View > Slide Master > Slide master1] 5 HSA When can you make contributions for [Year 1]? Jan 1, Year 1 Copyright 2017 Deloitte Development LLC. All rights reserved. Apr 15, Year 2 Presentation title

[To edit, click View > Slide Master > Slide master1] 6 FSA When can you make contributions for [Year 1]? Election made before Plan Year Copyright 2017 Deloitte Development LLC. All rights reserved. Contribution s made on pay period basis

Presentation title [To edit, click View > Slide Master > Slide master1] 7 FSA/HSA Relevant Indexed annual limits FSA HSA $2600 $3400 individual $6750 family

Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 8 FSA FSA/HSA Differences in the type of plans 1. Use or Lose 2. Employer owns funds. 3. Cannot change election during the year. 4. No significant eligibility

hurdles. 5. Not portable between employers 6. No cash out opportunity. 1. Rolls over Each year. 2. Employee owns funds. 3. Can change election during the year. 4. Requires HDHP to be eligible. 5. Is Portable between employers. 6. Cash out available, but may incur penalty tax regime. HSA

Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 9 HSA State Taxation California Alabama New Jersey Copyright 2017 Deloitte Development LLC. All rights reserved.

Presentation title [To edit, click View > Slide Master > Slide master1] 10 FSA/HSA Employees role in participation FSA: HSA: Elect the $500 Carryover feature on your Medical FSA. Can be made by a salary reduction arrangement through a cafeteria plan (125 plan) Will be able to roll over up to $500 of your unused funds to the next year plan.

May receive a debit card that can be used for medical bills and other eligible expenses under IRS guidelines. The debit card can be used for qualified services and items, as the full amount of the employees annual contribution is available as soon as the plan begins. Elections to make contributions through a cafeteria plan can change on a month-by-month basis. Contributions to the HSA are pre-tax and not subject to individual or employment taxes. Above the line deduction. Individual decides: Whether he or she should contribute. How much to use for medical expenses. Which medical expenses to pay from the account. Whether to pay for medical expenses from the account or save the account for future use. Which company will hold the account.

Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 11 FSA Copyright 2017 Deloitte Development LLC. All rights reserved. 12 FSA Permissible Benefits Deductibles

Copayments Prescriptions Insulin Non-Prescription Medicine that is Prescribed for you, spouse, dependent, child under 27 at end of tax year Premiums, Long Term Care, Amounts

Covered Under Another Health Plan Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 13 FSA Administration Rules Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 14

FSA Year End Dilemma (Excess Funds) Grace Period Option: An employee has 2 months after the end of the plan year to incur eligible expenses. OR Carryover Option: Can carryover $500 of unused funds to the following plan year. Where Companies accumulate residual funds, consider giving everyone a premium holiday from a benefit to spend down the balance. Do not return in proportion to an employees unused balance.

Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 15 HSA Copyright 2017 Deloitte Development LLC. All rights reserved. 16 HSA Qualified Medical Expenses 213(d) medical care that is not covered by insurance

Copayments Prescriptions Insulin Non-Prescription Medicine that is Prescribed for you, spouse, dependent, child under 27 at end of tax year Premiums, Long Term Care, Amounts

Covered Under Another Health Plan Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 17 HSA Administration Rules Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year. If you meet these requirements, you are eligible individual even if your spouse has non-HDHP family coverage, provided your spouses coverage doesnt cover you. If another taxpayer is entitled to claim an exemption for you, you cant claim a deduction for an HSA contribution. Each spouse who is an eligible individual who wants an HSA must open a separate HSA. You cant have a joint HSA.

Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 18 HSA Year End - excess amounts: Rollover v. Refund Excess contributions are not deductible. Generally, you must pay a 6% excise tax on excess contributions. You may withdraw some or all of the excess contributions and avoid paying the excise tax on the amount withdrawn if you meet the following conditions. 1.) You withdraw the excess contributions by the due dates, including extensions, of your tax return for the year the contributions were made. 2.) You withdraw any income earned on the withdrawn contributions and include the earnings in Other Income on your tax return for the year you withdraw the contributions earnings. A roll over contribution isnt included in your income, isnt deductible, and doesnt reduce your contribution limit. You can roll over amounts from Archer MSAs and other HSAs into an HSA.

You must roll over the amount within 60 days after the date of receipt. You can only make one roll over contribution to an HSA during a 1-year period. Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 19 HSA 1040 Presentation (non-payroll) When you file you will need to include Form 8889 to report all contributions and withdrawals associated with your HSA. The form has a line for reporting your direct contributions to your HSA. You will carry that deduction to line 25 on your form 1040. Form 1099-SA from your HSA administrator reporting withdrawals from the account. Report those distributions on Form 8889 and indicate which were for eligible medical expenses and which were not.

Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 20 Year End Reporting Copyright 2017 Deloitte Development LLC. All rights reserved. 21 HSA Year End Reporting Copyright 2017 Deloitte Development LLC. All rights reserved.

Presentation title [To edit, click View > Slide Master > Slide master1] 22 HSA Year End Reporting Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 23 HSA Year end Reporting: Employee

Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 24 HSA Year End Reporting (Employee) Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 25 Fringe Benefits

Copyright 2017 Deloitte Development LLC. All rights reserved. 26 Fringe Benefits The following are Taxable Gift Cards Employer-Subsidized Meals Spousal Travel Commuting Expenses (Remote Workers)

Gifts Wellness Program Benefits (Cash) Copyright 2017 Deloitte Development LLC. All rights reserved. Presentation title [To edit, click View > Slide Master > Slide master1] 27 Fringe Benefits The following may be Taxable Employee Discounts

Fitness Facility Memberships Achievement Awards Tuition Assistance (Exec MBA) Copyright 2017 Deloitte Development LLC. All rights reserved. Moving Expense Reimbursements Presentation title [To edit, click View > Slide Master > Slide master1] 28

Audit activity in this area for all of these (Federal & State) Copyright 2017 Deloitte Development LLC. All rights reserved. 29 About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (DTTL), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as Deloitte Global) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the Deloitte name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms. Copyright 2017 Deloitte Development LLC. All rights reserved. 36 USC 220506

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