EPY: Health Savings Account Taxable Gross Component Ids Not Being Taxed as Expected (Doc ID 2812932.1)

Last updated on DECEMBER 14, 2021

Applies to:

Symptoms

MA taxation for Unemployment tax on Employer contributions to HSA need to be changed based on the below link.

The Department of Family and Medical Leave states the following:

Wages that are not subject to PFML contributions
Non-401(k) retirement plans and cafeteria plans
Most often, payments to or from retirement plans are not wages subject to PFML contributions.

Employer payments to a cafeteria plan (such as dependent care assistance or a health savings account) are not wages subject to PFML contributions as long as they are used to fund benefits that are exempted from wages (please see section 1(s) of M.G.L. c. 151A for more information). Employee payments to a cafeteria plan are wages subject to PFML contributions to the extent that they are part of an employee’s salary. Cash distributions from cafeteria plans are considered wages subject to PFML contributions.  

Please see section 1(s) of M.G.L. c. 151A for more information.

https://www.mass.gov/info-details/wages-subject-to-paid-family-and-medical-leave-pfml-contributions.

Applicable here, benefits exempted from wages under that statute includes:

The amount of any payment, including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment, made to, or on behalf of, an employee or any of the employee's dependents under a plan or system established by an employer which makes provision for the employees generally and their dependents or for a class or classes of the employees and their dependents, on account of (i) sickness or accident disability but, in the case of payment made to an employee or any of the employee's dependents, this paragraph shall exclude from the term ''wages'' only payments which are received under a worker's compensation law; or (ii) medical or hospitalization expenses in connection with sickness or accident disability; or (iii) death.

MA G.L. c. 151A, §1(s)(A)(1).  


The issue can be reproduced at will with the following steps:
1. Navigate to Taxable Gross Definition Table (Nav: Set Up HCM > Product Related > Payroll for North America > Federal/State Taxes > Taxable Gross Definition Table
2. Search for MA
3. Notice HSA and HSR shows: Adds To.

Changes

 Legislative changes from MA that need to be applied.

Cause

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