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Benefits

Why an HSA Might Be Your Best Plan Choice

If you’re trying to choose a health insurance plan, you might have seen an HSA option offered by your employer as one of the cheaper plans. In this article, were going to talk about what are the pros & cons of choosing a Health Savings Account compatible health plan.  

Where did Health Saving Accounts come from?

Back in in 2003 the United States Congress was looking for a way to encourage people to enroll in health insurance. Especially people who didn’t currently need medical treatment, who would then wait until they needed medical treatment before they tried to get health insurance.

Health Savings Account

Many people felt that insurance was too expensive and not worth it. In order to have a low-cost insurance plan, you need to design a health plan with a high deductible.

Welcome High Deductible Health Plans (HDHP)!

The IRS then created a special tax advantage to encourage individuals to save money for their future medical expenses.

Who should choose an HSA compatible plan?

The main benefit to enrolling in an HSA compatible plan is the lower monthly insurance premium compared to other plan options available. If you want the cheapest plan, the HSA plan is usually the least expensive option!

I usually recommend an HSA compatible plan to those people who:

  • Don’t usually, or never, see a doctor throughout the year.
  • Want coverage is case something major happens.
  • Primarily use doctors who don’t take insurance.

Pros of Choosing a High Deductible Health Plan with an HSA

Lower Monthly Cost

The biggest benefit of choosing this type of plan is the low premium cost. If you are looking for the least expensive plan, the plans with a higher deductible are usually going to be your cheapest option.

In order for a health insurance plan to meet the requirements as “HSA Compatible” put in place by the IRS, it needs to have a minimum deductible.

2020 Minimum Deductible = Individual: $1,400    |     Family: $2,800

2021 Minimum Deductible = Individual: $1,400    |     Family: $2,800

How to Open a Health Savings Account

Once you enroll in an HSA compatible health plan, you will be allowed to open a Health Savings Account.

An HSA is just like your standard checking account from your bank. You can open an HSA at most banks, like Bank of America. You can even open an HSA through Fidelity or Vanguard.

I prefer to use HSAbank.com, since they specialize in only Health Savings Accounts and they have the lowest monthly fee I’ve found of only $2.50 per month.

Click here to use our referral link and open your HSA today.

The Tax Advantage of an HSA

The tax benefit is very simple. Each year you are allowed to put a certain amount of money into your HSA. Anytime you deposit money into your HSA, it is a tax-deductible expense. Just like a traditional IRA.

For 2020, you can contribute up to $3,550 if you’re on the only one on your health insurance.

For 2020, you can contribute up to $7,100 if you are on a ‘Family’ plan. A family plan is yourself with at least one other person.

If you are 55 years old or older, you are allowed to contribute an additional $1,000 per year to your HSA.

You would receive this tax deduction even if you don’t itemize your tax deductions.

Managing Your HSA

No “Use it or Lose it” Feature

Unlikea Flexible Spending Account (FSA) you don’t need to spend all the money in your HSA each year. The money in your account would be available for you to use for qualified medical expenses forever.

Investing Your HSA Balance

Your bank will allow you to invest the funds in your HSA into different investment portfolios.

Different banks have different minimum amounts to be invested. For example, HSABank requires you to have at least $1,000 in the account before you can invest. You would be allowed to invest the balance over $1,000.

In general, the funds will grow tax-free! You can then use the funds for all medical expenses.

How to Pay for Eligible Medical Expense

The simple way to pay for medical expenses is to use the debit card that comes with your HSA. You must have the appropriate funds deposited in your HSA to pay for those expenses.

However, if you don’t have your HSA debit card handy, or want to use your credit card to get points, you can still get the tax advantage of your HSA. After paying for an eligible medical expense with something other than your HSA, you would later withdraw money to pay yourself back for that eligible medical expense.

You must have your Health Savings Account open and active with a balance at the time of treatment or at the time of purchasing your over-the-counter eligible expenses.

The HSA ‘Filter’ Technique

If you only want to contribute to your HSA the amount you spent on actual medical expenses for the year, I recommend using what I call the ‘Filter Technique’.

After opening your HSA, you must deposit a small amount of money to ensure your account is active and open. Even if that amount is $50, that is okay as long as something is in the account to keep it open.

Keep track of all medical expenses for yourself and your family throughout the year. In this scenario you would use a different funding source besides your HSA, such as your credit card, checking account, etc.

Tally up the total amount you’ve spent and deposit that amount into your HSA. Once that amount is deposited, you would receive that tax deduction for that deposit.

The final step is to immediately withdraw those funds, paying yourself back for the expenses you’ve already had throughout the year. This method ensures that you get the maximum deduction for our actual medical expenses spent that year.

What Can I Use My HSA Funds to Pay For?

You are allowed to pay for:

  • Medical Expenses
    • Cosmetic expenses would not be allowed, except in a situation where it was medically necessary. These cases would include a birth defect, a personal injury, or a disease that resulted in disfiguring. You might need to get a letter from your doctor attesting that your procedure is medically necessary.
  • Dental Expenses
  • Chiropractic Expenses
  • Prescription Drugs
  • Feminine Hygiene Products        
    • This is a newly eligible expense starting in 2020.
  • Vision Expenses – Such as exams, contacts and glasses
  • Over the Counter Medications
    • General health daily vitamins and supplements are excluded. The item you are purchasing must be used to treat a specific illness or disease or medical condition.

To see a complete list of the IRS guidelines, click here.

It is also very important to remember, you can use your HSA funds for your dependents, even if they aren’t on your health insurance plan!

The specific definition of an eligible dependent is anyone who could be listed as a dependent on your tax return. That means your spouse, daughter, son, step-child, etc.

If you have an adult child on your HSA qualified health insurance plan, but they file their own taxes, they would need to open their own HSA. Their account could only be used for themselves and their qualified dependents.

What are the Cons to Enrolling in an HSA?

The main downside to having an HSA compatible health insurance plan is the plans actual benefits.

These plans must have a higher than normal deductible.

You don’t have traditional co-pays for doctor visits, urgent care, emergency room, or prescription drugs. The IRS requires that HSA compatible plans have no upfront benefits before your deductible.

The only exception to this is your annual checkup, which is still covered at no cost for almost all health insurance plans.

If you are currently getting treatment, have planned treatment in the near future, or need prescription drugs, it is important to understand what costs you will have up front before your deductible and the insurance company start paying for your expenses.
If you have immediate medical expenses, it may or may not be beneficial to choose an HSA compatible plan. It is important to calculate the monthly premium savings and your expenses against your other plan options.

Employer Contributions & Premium Assistance

If your company is paying for a portion of your health insurance plan, or you are receiving a tax subsidy from the government you may want to choose a health insurance option with better benefits.

Depending on the amount you are receiving, the savings you would get from enrolling in a cheaper plan may not be worth it. It is important to evaluate what the best plan is based on what you would pay after any contributions from your employer or tax-subsidy.

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Which Is The Best Benefit Management Software for Small Businesses?

Understanding and managing employee benefits can be complicated. There are so many benefits products and packages to choose from and, at the same time, you have to make sure you comply with state and federal regulations. To simplify these processes, most organizations, big and small, rely on employee benefits management software.

What is Employee Benefit Management System?

Employee benefits management software (sometimes called a ben-admin system) is used by companies to manage employee benefits as well as ensure compliance with state and federal regulations. A typical benefit management software will assist with medical insurance, pension & retirement, stock options, and leave. These systems automate processes and tasks to make it easier to manage your employee benefits.

Employee Benefit Management System

Benefits management software can be used as a standalone system or integrate with other HR and enterprise software. Integration add-ons can cost anywhere from $1 PEPM (Per Employee Per Month) up to $5 PEPM depending on the software. 

Ease vs Employee Navigator vs Bernie Portal vs GoCo

Let’s take a look at the four of the most popular benefit management administration systems for you to get an idea of which one is right for your business.

The Different Pricing Costs of Each System

Firstly, let’s look at a cost comparison between these four systems. Some or all of the cost will be paid for by your employee benefits broker. Although, most brokers will only offer one software platform to choose from. 

Here at Benefit Leader, we don’t believe in the ‘one-size fits all’ mindset. We work with all benefits management systems. 

Ease

This system has a great benefits management feature and basic HR management and record keeping. The employee onboarding can be added at a small monthly cost. However we believe your broker should pay for this, we certainly do. The more robust HR management features like PTO management can also be added for a small monthly fee between $2-$4 a month. This is usually paid for by the employer. 

Employee Navigator

This software is very similar to Ease and is paid for by your broker. There is no additional cost to the employer, however, different brokers may not pay for all features. If you want to make sure you have all of the features Employee Navigator has to offer, it’s best to make sure your broker has at least the Elite Employee Navigator package. 

Bernie Portal

Similar to both Ease and Employee Navigator, the basics are covered by your broker. If you want to add on PTO tracking, applicant tracking, time & attendance, they would each cost $5 per employee per month. 

GoCo

GoCo works a little bit differently. GoCo was built as an HR management system first, so they charge $5 per employee per month. This will include the basics of HR management, including onboarding, and document management. The benefits management feature is an add on for GoCo and costs an additional amount. The cost of the benefit management feature should be paid for by your broker. 

Time-off tracking can be added for an additional fee, usually around $3 -$5 per employee per month. 

Additional Features

All four benefit management systems offer similar systems, however, the starting packages may only provide the basics. Features such as software integrations, ACA forms, and payroll sync are usually charged as extras (per employee per month).

Payroll Integrations Costs

All four benefit management software systems integrate with many different payroll applications. Insurance carrier integration is generally quite comprehensive. The biggest difference between the four is whether or not they integrate with your payroll provider and what does that integration cost. 

Payroll Integrations

The integrations between payroll companies can sometimes be a different cost based on the payroll provider. 

Ease

Ease integrates with ADP, Heartland, & Paylocity. The cost for each integration is between $2-$3 per employee per month depending on the payroll provider. 

Employee Navigator

Employee Navigator integrates with ADP, Paylocity, Paycor, Benefitmall, Kronos, and more. Your broker will need to have the Elite package and there is usually a fee associated with the connection to each payroll provider. 

Bernie Portal

Bernie Portal integrates with ADP, Paycor, and Proliant. 

GoCo

GoCo integrates with all payroll providers and this is one of their best features. They charge a flat fee of $3 per employee per month. They have an automatic electronic connection with many payroll providers, like ADP, Paylocity, Paychex, and even Gusto. 

If they don’t have a direct feed to your payroll provider, they will manually take care of any payroll deduction changes for you at no additional cost. 

Benefit Management and Payroll Integration Process

Regardless of what the different software companies and payroll providers say, integrating the two pieces is not always an easy task. This can take days or even weeks with many back and forth reporting and error corrections between the two.

This is why Benefit Leader has an integration team that does it all for you! We’ve managed the integration process many times and understand the nuances and difficulties involved. This is why we take care of the process entirely for our clients at no additional cost. 

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What is an HRIS?

HRIS software is software used by the Human Resources department of companies and business to manage their employees. Different HRIS programs have different features and tools. In this article I’m  going to talk about the different types of HRIS systems that are available and what you should look for in choosing the best software for your needs. 

An HRIS will help keep all of your important employee files and information organized. As most HRIS’s save your data in the cloud, there is never a worry of misplacing the information. Instead of keeping employee data in a filing cabinet which can be destroyed, your data will be safe and accessible from anywhere. This is extremely helpful if your company has multiple locations or if you ever need to access employee info when you’re not in the office. 

In today’s world when more and more companies are having employees work remotely, it’s best to keep employee data in the virtual world instead of the physical world. 

What does HRIS Stand for? 

HRIS stands for Human Resource Information System. However, you will find that colloquially people refer to it as an HRIS software or even HRIS system… even though you are essentially saying ‘system’ twice in a row. I’m guilty of it all the time. 

Different Aspects of an HRIS

Different HRIS software will have different capabilities and features. It’s important that the software you choose meet your needs. Some of the different common features you’ll find in most software is:

  • Benefits Management
  • Onboarding & Offboarding
  • HR Compliance
  • Org Chart
  • Applicant Tracking System
  • Mobile App
  • PTO Tracking

Benefits Management System

One of the most important features of an HRIS is its ability to help your company manage the employee benefits. Every HRIS needs to have an employee benefits management feature. 

Your HRIS will allow your employees to enter their information, as well as their dependent’s info, into the system. They will be able to view their benefits and plan options. This should include the cost as well as the plan summary. 

A good benefits management system will help the employees in comparing their plan options. Once an employee chooses a plan, the system should also automatically fill out the correct forms for each insurance carrier. 

When the software is filling out the insurance forms for the employees, instead of having your employees manually fill out the forms, this ensures that no data is missing and that the data is legible. I can’t tell you the number of times forms have to get sent back for clarification or because they were faxed or scanned over and they are no longer readable. A good benefits management feature solves that issue and saves businesses tons of time and effort. 

The HRIS will also allow your employees to electronically sign their paperwork. With the ESIGN Act passed in 2010, every insurance carrier I’m aware of now allows e-signatures to be valid. 

Your employee’s enrollment application will forever be saved in the HRIS as a document that can always be referred to. This is especially important if you have employees who decline or waive some or all of the benefit options offered by the company. You always want to have proof on file that an employee chose not to enroll if it ever comes up in the future.  

Benefits Management and EDI Feeds

EDI stands for Electronic Data Interchange. An EDI Feed is an electronic link between your HRIS and the insurance carrier you work with. An EDI feed will allow your enrollments, changes, and terminations to flow directly from the HRIS into the insurance companies processing systems. 

This completely eliminates the need to print out any forms (even if they’ve already filled out) and send them into the insurance company. It also increases the time enrollments are processed, as well as eliminates most errors that can happen when you’re manually having to send in your forms or enter the data manually on the insurance carrier’s online portal. 

It’s important to know that not all insurance carriers allow an EDI feed, even if the HRIS is capable of generating one. If you have a small group health insurance plan, (health insurance for companies with less than 50 employees), your insurance carrier will likely not allow you to have an EDI feed. 

However, most ancillary insurance carriers do have the capability to allow you to have an EDI feed. You should confirm with your HRIS before you make a purchase as to which companies their EDI syncs with. 

New Hire Onboarding

When you’re a new hire, you are usually giving a large packet of information that you’re supposed to read, fill out, sign, and return back to your HR department. The list of documents is getting longer and longer these days, with new compliance requirements and regulations making that new hire packet bigger and bigger. 

Your HRIS will allow your employees to fill out all of the paperwork electronically! 

Your HRIS should include the ability for your employees to fill out their I-9 and W-4 forms. It should allow you to upload your company handbook, policies, and documents for your employees to review and e-sign all at the same time. Different systems will have different capabilities when it comes to what you can upload as your custom company documents. If your onboarding paperwork requires that the employee fill out forms that include more than their basic information, you may need to make sure the HRIS has a custom document feature. 

A good HRIS will allow your employees to fill out all of their vital information, including direct-deposit information and emergency contact info. All of their data will be saved securely in the cloud for you or anyone you’ve authorized on your team to view later. You can also save your own documents and scanned copies of their identification verifications in the HRIS. 

When an employee is onboarding, you want to make sure all compliance documents are also included. When that is done in an online system, you no longer need to print forms and you know it’s going to be the same documents for all new hires. After an employee has finished their onboarding paperwork, the system should automatically move them on to choosing their benefits online.

COBRA Software Integration

If you have 20 or more employees, you are required to offer your employees who are terminated or leave your company COBA continuation. Almost all companies in the United States hire a third-party administrator to handle their COBRA compliance. It’s cheap and a lot easier than trying to manage it in house. 

Without a COBRA integration feature, for each employee that is hired and employee termination you’re going to need to contact your COBRA administrator and fill out the employee’s information so that they receive the proper COBRA compliance notices. 

With an HRIS COBRA software integration, your HRIS will automatically notify your third-party administrator for you with all your employee’s info. You don’t have to lift a finger and your COBRA compliance will be taken care of!

HRIS With Payroll Integration

The goal of any HRIS is to make your life easier and eliminate double work. One of the easiest ways to eliminate double work is by integrating your HRIS with your payroll provider. For each employee being onboarded, that information will need to be inputted into your payroll provider. You will also need to enter the employee’s paycheck deductions for their portion of their benefit costs. 

Having your payroll integrated removes the need for you to calculate the employee benefit deductions on your own and manually enter them into payroll. If there are any changes in the future, it eliminates the need for you to go back and make those changes again, since the HRIS should be updating the payroll automatically. 

In 2020 most of the major payroll providers are allowing you to integrate with a few different HRIS’s. 

For me and my clients, this is one of the most important features to consider when choosing an HRIS. Does it integrate with my payroll provider? If so, what exactly is the level of integration? Is everything automatic, or do I need to still generate a report each pay period and upload it to my payroll provider? 

Some HRIS’s will have their own payroll build into the HRIS. When that is the case, you will pay an additional fee for the payroll portion of the software. As a rough estimate, it usually costs about $10 a month per employee per month for payroll. 

List of Different HRIS Software Companies

When I first started in this business, there were less than a handful of HRIS companies available for business. There were almost no HRIS companies that a small to medium-size business could afford. These days there are hundreds of different HRIS options to choose from. While many of them are popular, it’s important to make sure that your HRIS meets your company’s needs.

Here is a list of the most popular HRIS companies, but not always the best software:

Workday

Kronos

PDS

Paycor

Ease

Bernie Portal

iSolved

BambooHR

Ultimate Software

Namely

Rippling

Workday

Ceridian

Criterion

Flock

Paylocity 

Sage People

People Guru

HRIS Implementation

Getting a new HRIS in place is an exciting idea, but the process to get there is not always as exciting. It takes time and effort to make sure everything is set up properly for your company. If you’ve never set up an HRIS before, it’s important to make sure that the HRIS company you choose has the proper training in place if they aren’t the ones doing the implementation for you. 

Some HRIS systems will do some or all of the work for you to set up your system. Some simply provide you with a login and setup is on you. 

If you are a larger company looking for a highly sophisticated HR management software like Workday, there will be implementation costs associated with your software. I’ve seen Workday charge over $1,000,000 in startup fees for a large client of ours. 

Make sure that you know what your HRIS setup is going to cost you wither in time or money or both. 

ACA Reporting Software and Compliance

If your company has 50 or more full-time equivalent employees, you would be an Applicable Large Employer. It is absolutely vital that your HRIS software allows you to manage your ACA reporting and compliance. 

There are two ACA features your HRIS needs to have:

ACA Variable Hour Tracking & Eligiblity

When you have employees that may or may not be considered full-time for ACA rules, you need to be able to track their hours each month. ACA hourly tracking feature will then calculate based on your look-back period rules, when and if an employee is considered a full-time employee and should be offered medical plan benefits. This is an absolute nightmare to try and track manually. 

If you only have employees that are all full-time and only allow your employees to work less than 30 hours a week no matter what, this feature isn’t needed for your company. 

ACA 1095 Reporting

The IRS requires that you keep track of all employees and their benefits status each month. This means you’ll need to track each month whether the employee was offered benefits, in a waiting period, declined an offering, and whether or not those benefits were affordable based on different safe harbor rules. 

Manually trying to keep track of this each month or going back through your payroll and insurance bills is extremely time-consuming. From there you would need to then write the applicable code for each month of the year for all employees who worked for you last year. 

A good HRIS will do all of the tracking and reporting for you. Sometimes the ACA feature is an add-on that will cost an additional monthly fee. Regardless, it is absolutely worth it. Employers are now seeing the ramifications of not filing or incorrectly filing their ACA reports with hefty fines from the IRS in the six-figures. 

Who Manages the HRIS System? 

Unless you are spending a large amount of money every month on your HRIS, your HR department will likely be the team that manages and keeps up to date the documents and HR software for your company. 

The benefits management piece of your HRIS will need to be updated every year when the benefits renew. Your medical insurance policy will likely change to some degree each year and new documents and plan information will need to be updated. Depending on your arrangement with your employee benefits broker, this be managed annually by them. We recommend that your broker manages at the very least the benefits portion of your HRIS to ensure that your information is accurate and that all compliance is properly in place. 

Each state will have different requirements and notices that need to be given to employees annually and when they enroll in a plan. There are also federal requirements required. For example, your HRIS should give the employees the Summary of Benefits and Coverage (SBC) for their specific plan. It’s required that employees be shown that document when they enroll in a plan. Building the SBC into the benefits enrollment process ensures that the employee gets the notices and allows them to refer back to it at a later date. 

HRIS vs HCM

HCM stands for Human Capital Management. Human Capital is defined as the intangible assets of your worker’s skill and experience. Human Capital Management software is simply software that helps manage your workforce. 

When using HRIS versus HCM, they can essentially be interchangeable at first glance. You’ll find that many people don’t see a difference between the two, whereas the HCM companies will generally advertise that there is a big difference. 

When it comes to the companies that promote themselves as an HCM, their software platforms tend to have more features and abilities to manage the employees on a day to day or month to month basis. This can include workflows, employee reviews, and providing an environment to better assist teams within your company to work together on projects. You’ll find that HCM’s will focus more on the productivity of the company, rather than the HR information and management of the employees from a compliance and informational perspective. 

Free HRIS Software

There are many different free HRIS systems out there. To be frank, they are all missing key pieces or extremely bare-bones in functionality and information. There are no free HRIS systems that are worth your time and effort. However, there are HRIS platforms that can be free to you. 

What’s the catch? There isn’t one! I’ll explain…

One of the key pieces of an HRIS is its ability to help manage your company’s employee benefits. Good brokers around the country now realize that they need to help companies and their HR departments manage this process by providing the HRIS for them. These “free” HRIS software are being paid by the insurance agency. A good agency will even setup the benefits management side of the platform for you. 

Different brokers will provide different HRIS systems, but they usually only provide one option to choose from. They don’t like the headache or have the man-power to learn and manage multiple systems.

How is Benefit Leader is different from everyone else?

Benefit Leader is a full-service employee benefits management and employee concierge service agency. 

When it comes to an HRIS, we don’t believe in a one size fits all solution. Different companies have different needs and finding the right HRIS for your company is part of our job. 

Not only do we provide free HRIS options, but we implement and fully manage those HRIS platforms on an ongoing basis for our clients. This takes the work off your shoulders, ensuring the benefits information is accurate and that your company is in compliance with all regulations. Benefit Leader manages all aspects of your benefits from employee questions, onboarding and offboarding, COBRA, and ACA compliance. 

Stop doing so much work and let our trained professionals do it for you. It’s all we do and we’re pretty good at it.