Quick links

• 
  Introduction
  
• 
  What are HSAs, FSAs and HRAs?
  
• 
  What are the differences between HSAs, FSAs and HRAs?
  
• 
  What changes have been made to HSA, FSA and HRA in 2023?
  

Introduction

HSA, FSA, HRA are programs designed to give individuals tax advantage to offset health care costs. In this article, we will explain these programs and provide you information about changes made to these programs by the IRS for 2023.

What are HSAs, FSAs and HRAs?

Health Savings Accounts (HSAs)

HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay healthcare premiums.

While you can use the funds in an HSA at any time to pay for qualified medical expenses, you may contribute to an HSA only if you have a High Deductible Health Plan (HDHP) — generally a health plan that only covers preventive services before the deductible. For plan year 2023, the minimum deductible for an HDHP is $1,500 for an individual and $3,000 for a family.

So, for you as an employee to be able to contribute to HSA, your employer has to offer a HDHP plan, and you should have enrolled in that plan.

What are the benefits of an HSA?

There are several benefits from having an HSA:

• Contributions to HSA are tax free
• The HSA account is portable.  The employee owns the money in the account.  If the employee leaves the employment, s/he can take the account with him/her.
• It almost acts like a 401K plan.  The interest and other earnings are tax free.  

Flexible Spending Arrangements (FSAs)

A health Flexible Spending Arrangement (FSA) allows employees to be reimbursed for medical expenses. FSAs are usually funded through voluntary salary reduction agreements with your employer. No employment or federal income taxes are deducted from your contribution.

Unlike HSA, there is no reporting requirement for FSAs on your income tax return.

Health FSAs are employer-established benefit plans. These may be offered in conjunction with other employer-provided benefits as part of a cafeteria plan. Employers have flexibility to offer various combinations of benefits in designing their plans.

For 2023, the annual contribution limit rises to $3,050, up from $2,850 in 2022.

What are the benefits of an FSA?

There are several benefits from having an FSA:

• Contributions made by the employer to the FSA are excluded from your gross income.
• No employment of federal income taxes is deducted from the amount contributed to the FSA.

Health Reimbursement Arrangements (HRAs)

A Health Reimbursement Arrangement (HRA) must be funded solely by an employer. The contribution can’t be paid through a voluntary salary reduction agreement on the part of an employee. Employees are reimbursed tax free for qualified medical expenses up to a maximum dollar amount for a coverage period. An HRA may be offered with other health plans, including FSAs.

Unlike HSAs, which must be reported on Form 1040, 1040-SR, or 1040-NR, there are no reporting requirements for HRAs on your income tax return.

What are the benefits of an HRA?

There are several benefits from having an HRA:

• Contributions made by the employer to the HRA are excluded from your gross income.
• Any unused amounts in the HRA can be carried forward for reimbursements in later years.

What are the differences between HSAs, FSAs and HRAs?​

What changes have been made to HSA, FSA and HRA in 2023?

Get in touch with us for an expert-led demo to know more about UZIO payroll services.

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Quick links

• 
  Introduction
  
• 
  Premiums are going up but consumers will not see it because of enhanced subsidies
  
• 
  The “Family Glitch” has been fixed
  
• 
  Marketplace eligibility rules have been relaxed
  
• 
  New entrants entering the marketplace, some leaving
  
• 
  Low-income individuals can enroll year around
  
• 
  Conclusion
  

Introduction

It is that time of the year. The leaves are falling, days are getting shorter, temperatures are beginning to dip and the Affordable Care Act (ACA), also known as Obamacare, launched the open enrollment for coverage starting January 1, 2023. The open enrollment will last from November 1, 2022 to January 15, 2023 in most states. It is worth noting that generally individual/family health coverage is no longer available for purchase year-around. Individuals can sign up for health insurance during open enrollment or what is called SEP (special enrollment periods), somewhat similar to employer-sponsored coverage.

This is the tenth year since the launch of ACA. There are some very exciting changes this year. Some of these changes will make it more affordable for low income families to get health insurance coverage through ACA.

In this article, we will cover the major changes that you should be aware of!

Premiums are going up but consumers will not see it because of enhanced subsidies

In 2023, according to the CMS (Centers for Medicare and Medicaid Services), on average, premiums for the benchmark plan available on ACA marketplace will increase 4% from 2022.  However, because of the increased subsidy available following the implementation of the American Rescue Plan Act of 2021 (ARP) and the Inflation Reduction Act of 2022 (IRA), the end consumers will not see an increase in their cost.

People who earn up to 150% of FPL (Federal Poverty Line) – so make up to $20,385 for an individual and $27,465 for a couple – can now get silver plans on the ACA marketplace for zero premium.

Consumers who earn up to 400% of FPL – so make up to $54,360 for an individual and $73,240 for a couple receive subsidy on a sliding scale.

Consumers who earn more than 400% of FPL, they will not be required to pay more than 8.5% of their household income toward premiums. This change may only provide limited relief to young individuals as the unsubsidized plans for young adults in most areas already cost less than the 8.5% of someone making 400% of FPL. However this will offer substantial relief to older individuals.

The “Family Glitch” has been fixed

Until this year, millions of people have been ineligible for ACA subsidies because of something called the “Family Glitch”. Generally, people are ineligible for ACA subsidies if they have an offer of “affordable job-based coverage”. However, until 2023, the affordability determination has always been based on the cost of employee-only coverage, without taking into account the cost to add family members to the plan. If the employer-sponsored plan was deemed affordable for the employee coverage, the entire family was ineligible for subsidies in the marketplace, as long as they were eligible to be added to the employer’s plan. This is known as the “Family Glitch”.

This year, the IRS proposed a long-awaited fix for the family glitch. Under the new rules, the marketplace will do two separate affordability determinations when a family has access to an employer’s plan: one for the employee, and one for the whole family. If the employee’s coverage is considered affordable but the family coverage is not, the rest of the family will be eligible for subsidies in the marketplace.

Marketplace eligibility rules have been relaxed

During the previous Administration, insurance companies offering policies on HealthCare.gov were permitted to refuse to renew coverage for people who had fallen behind on premium payments. For 2023, that will no longer be the case. People who fell behind on premium payments in 2022 (or even lapsed coverage due to nonpayment) will still be able to enroll in a 2023 policy offered by that insurer.

New entrants entering the marketplace, some leaving

The consumers should see more choices when shopping for plans this year. A number of new insurers are entering the marketplace and a few insurers are also exiting the exchange. To take advantage of these choices as well as availability of enhanced subsidies, it is strongly recommended that consumers should actively shop for plans instead of “passive-renewing”. 

Low-income individuals can enroll year around

Normally individuals are not able to enroll in coverage on the marketplace year around. However this year,  people with annual income up to 150% of FPL ($20,385 for a single person and $34,545 for a family of 3 in 2023) will be able to enroll in marketplace plans year-round. The new low-income SEP, first offered in 2022, will continue to be available this year.

Recommended Reading: Social Security Changes in 2023: What you need to know?

Conclusion

Consumers looking for individual or family coverage should actively shop for plans on the healthcare.gov marketplace or their state based exchanges. They will see increased choices and increased subsidies potentially resulting in getting healthcare coverage for next year without any cost increase which is great considering for everything else the prices have gone up.

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Introduction

Some new things are coming your way in regards to social security taxation in 2024. On October 10th 2024, the Social Security Administration announced that the 2025 social security wage base will increase from the current $168,600 to $176,100, a $7,500 base increase (The SSA fact sheet can be found here). There will be no changes made to medicare taxation as there is currently no wage limit and all covered wages are subject to the 1.45% tax. Wages in excess of $200,000 in 2025 will also remain subject to the additional medicare tax of 0.9% to only be withheld from employee’s wages and not subject to employer taxation.

Unlike the increased wage base, the Social Security tax rate of 6.2% will remain the same in 2025. This will make the maximum social security tax both employers and employees could potentially pay in 2025, $10,918.20, an annual increase of $465.00 from the 2024 maximum.

Self Employed?

For self employed individuals in 2025 the social security wage base will also increase to $176,100 with no limit on wages subject to Medicare tax. The self employed social security tax rate remains unchanged at 15.3% with a maximum tax liability of $20,922.60 annually.

Cost of Living Adjustment (COLA)

With the increase in the Social Security wage base also comes an adjustment to benefit checks. The Social Security Administration announced a 2.5% increase in benefit checks for 2025, while the increase seen in 2024 was 3.2%. This follows the significant 8.7% increase implemented in 2023. For more information on the increase in benefits, please click here.

Table: Changes in the wage base and social security taxes in the past few years (1998-2025)

Recommended Reading: Social Security Wage Base 2024

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Quick links

• 
  Introduction
  
• 
  Healthcare benefits thru a PEO
  
• 
  Why Does Your Healthcare Cost Go Up with a PEO?
  
• 
  What are your options?
  
• 
  Need for a technology platform
  

Introduction

When you made the decision to join a PEO (Professional Employer Organization), your reason could have been:

• You were small and you thought you can save on healthcare cost by leveraging the scale of the PEO
• You were not ready to invest in a full time HR role inside the company
• You were looking for one place to go for all your HR needs including payroll, benefits etc.

For many companies these reasons remain true even after they have been with the PEO for a few years.  

For others, the healthcare savings disappear a few years into their relationship  with the PEO. These companies receive as much as 30% or more rate increase on their healthcare cost at the time of renewal after they have been with the PEO for a few years. If you fall in that category, what are your options? In this article, we will shed some light on this topic.

Healthcare benefits thru a PEO

A PEO has a “co-employment” arrangement with its employer clients. When a small business joins a PEO, through the co-employment arrangement, the small business is now part of a large business. The PEO can spread the risk over a large number of employees and offer you healthcare benefits at a lower cost as compared to the one available in the open market. The downside is that your benefit choices are limited. You are covered under the master plan of the PEO so you are limited by what the master plan offers.

Why Does Your Healthcare Cost Go Up with a PEO?

If you are a healthy group that is not overusing health care or submitting unreasonably high health claims, you may be wondering why you suddenly received a 30% rate increase at the time of renewal.

Well, the reason is that while your group is healthy, it is possible that some other groups with the PEO might have used the healthcare system extensively resulting in a very large healthcare claim cost. Because you are part of the master plan, some of that high healthcare cost is being passed on to you.

This becomes more challenging because PEOs will typically not share with you details of your healthcare usage so when you get that rate hike at the time of renewal and no detailed information regarding why you received that hike, it can be very frustrating. If this happens to you, your obvious inclination would be to reach out to a benefit specialist and explore your options in the open market.

What are your options?

Your benefits broker will shop your group in the open market. To be able to do that they will need the following information:

Census information

This will include details about your employees and their dependents.

Renewal information

This will include information about the plan design, co-pays, deductibles as well as choices made by your employees when selecting their plans. All this will be there in the renewal package you received.

Your benefits broker will use this information to shop your group in the open market with the goal of delivering you a plan as close to what you had with the PEO but at a much cheaper price. You have many options to choose from in the open market. Some of these options are listed below:

Fully Insured Plans

These are your traditional health insurance plans sponsored by the employer. The employer pays monthly premiums to the insurance company. The insurance company pays the health care providers when employees and their dependents use the healthcare system. Depending on the plan, employees and their dependents are required to pay co-pays and deductibles for services that are covered by the plan. If you are looking for the financial security of knowing your out-of-pocket cost for providing healthcare to your employees, this is the kind of plan you should look for.

Level Funded Plans

If you are willing to step out of the financial security of the fully insured plan but are not ready to jump into a self insured plan where you will be responsible for paying healthcare providers, this is a nice middle of-the-road option where you benefit if your group runs healthy but still have a backstop of a “stop-loss” insurance if suddenly you are hit with a big healthcare bill.

With a level-funded plan, an employer pays a health carrier the same monthly amount to cover the estimated cost of expected claims, the premium for stop-loss insurance and the plan administrator cost. Stop-loss coverage is important because it limits an employer’s financial exposure for claims over a certain amount. 

At the end of the year, if your group ran healthier than expected, you might get a refund back from the insurance company which is a very pleasant surprise for the employers.

Self Insured Plans

Self Insured Plans are those where, from the financial risk perspective, the employer acts like an insurance company. The employer collects premium from enrollees and takes the responsibility of paying the medical claims for employees and their dependents. This cuts both ways. If your group runs healthy, you keep all the savings. However if you are hit with a high medical claim, you will have to pay that out of your own pocket. Typically larger companies opt for self insured plans because of the increased financial risks involved. The employers typically contract with a TPA (Third Party Administrators) for services like enrollment, claim processing etc.

Based on your overall profile, your benefits broker should be able to come up with a number of options for you including some level funded plans, some fully insured plans and even the self insured option.

Recommended Reading: How to transition out of a PEO and bring your HR, payroll and benefits in-house?

At any point in time if you feel like connecting with us in this respect, our team is there to help. You can use the link below to book a call with us.

Contact UZIO

Need for a technology platform

Whichever option you choose, you will need a technology platform for benefits enrollment as well to support other HR functions like payroll, PTO management, employee record management etc. You should look into an all-in-one-HRIS platform like UZIO if you decide to leave your PEO.

By working with a benefits broker to choose the right health insurance plan in the open market and using an all-in-one HRIS platform like UZIO, you would save on cost and provide your employees with a much better experience.

Get in touch with us for an expert-led demo to know more about UZIO payroll services.

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Quick links

• 
  Introduction
  
• 
  What Is a Workers’ Comp Audit?
  
• 
  When Should You Expect a Workers’ Comp Audit?
  
• 
  How To Prepare for Workers Comp Audit?
  
• 
  What Can You Do To Avoid the Pain?
  
• 
  How Can Your Payroll Vendor Support You During Workers Comp Audit?
  
• 
  Conclusion
  

Introduction

Chances are you dread those couple of weeks every year when you are undergoing workers’ comp audit. Because most states mandate this audit, you can not avoid it. In this article we will share the steps you can take to make workers’ comp audit less painful.

What is a Workers’ Comp Audit?

Before we answer this question, let us understand why you purchase workers’ comp insurance. Workers’ compensation insurance provides medical and wage benefits to employees who are injured or become ill at work. The coverage is mandated by each state. Workers’ comp is considered a social insurance because it relies on a social contract between management and employees, where in exchange for purchasing workers’ compensation insurance, business owners are protected from civil suits from their workers who are injured on the job.

The workers’ compensation insurance is provided by insurance companies in most states. In some states it is underwritten by the state. When you purchase a workers’ comp insurance policy, the premium payment is estimated based on:

• Employee wages including bonuses and tips
• Employee class codes: These are three or four digit numbers insurers use to determine the risks of each job
• Experience modifier: Modification of the class rates based on the loss history of an individual business

To check that the estimates are right, your insurance company requests a workers’ comp audit. The audit verifies that the premiums paid for the workers’ comp insurance are accurate. The auditor generally evaluates the accuracy of the risks, class code, experience modifier and payroll.

When Should You Expect a Workers’ Comp Audit?

Once your workers’ comp policy expires, the insurance provider will notify you of an audit within 60 days. In many cases, you may receive an email directly from the auditor assigned by the insurance company.

How To Prepare for Workers Comp Audit?

Normally when the auditor reaches out to you to inform you about the audit, s/he will also tell you what is needed for the audit. Most of the needed information comes out of your payroll system. Your payroll vendor should have a section dedicated to reports needed for workers’ comp audit. Mostly you should be able to get what you need from these reports. Sometimes the auditors may ask for data not available through canned reports. If that is the case, you should ask your payroll provider to create a custom report that gives you the data you need. Please be aware that your payroll provider may ask for additional time to create the custom report and may even charge you for it.

What Can You Do To Avoid the Pain?

In order to avoid the pain associated with a workers’ comp audit, you can take the following measures:

Classify employees correctly

Because class codes are used to estimate the premium, you can reduce a lot of pain during the audit, if you classify all your workers correctly right out of the gate. Most states use the codes provided by the National Council on Compensation Insurance (NCCI). If you are looking for a particular code, you can look-up here.

Accurate Payroll Estimate

Apart from the class codes, another important factor in determining your insurance premium is your payroll estimate. When requesting workers comp insurance, you want to make sure your payroll estimates are as precise as possible. To avoid the pain of a large bill after an audit, it is important to stay on top of any changes to your payroll throughout the year. Your insurance broker should be able to help you with this.

How Can Your Payroll Vendor Support You During Workers Comp Audit?

Because most of the data needed for the audit comes out of the payroll system, your payroll vendor plays a key role during the workers comp audit. A good payroll vendor makes your life easy during the audit. They support you in the following ways:

Help you capture correctly the workers comp codes

As stated above, recording correct class code for each employee is key to have a hassle free audit. Your payroll solution should make it easy to store the correct code for each employee. For example, in UZIO, we have a feature that allows you to configure the system so that payroll can not be run unless all employees have the correct worker comp code assigned.

Provide rich set of workers comp reports

Auditors want to see payroll data grouped under different class codes. Under each class code, auditors typically ask for data to be grouped for each employee. For each employee, they may ask for summary payroll data or payroll data for each pay period.

Your payroll vendors should provide these reports as canned reports so that you can run these reports as and when you need them without having to go to your payroll vendor. If these reports are not available out-of-the-box, you will need to request for custom reports created for you which may take extra time and potentially extra cost.

Recommended Reading: Biggest pain point with Payroll and HR software

At any point in time if you feel like connecting with us in this respect, our team is there to help. You can use the link below to book a call with us.

Contact UZIO

Conclusion

To have a smooth workers’ comp audit, two things are key. The first is to partner with the right kind of payroll provider. An easy to use platform like UZIO which has a rich set of workers’ comp reports helps a lot. The second is to ensure all your employees are assigned the correct class codes and you are on top of any major changes to your payroll and class code data throughout the year. If you do these two things, you will avoid a lot of pain during your workers’ comp audit.

Get in touch with us for an expert-led demo to know more about UZIO payroll services.

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