We have an employee who is leaving our medical insurance. He wanted to make one last HSA contribution. After the payroll was completed, I was informed by our bank that he exceeded the amount he was able to contribute since he was leaving the plan early in the year. This employee has $600.00 that did not go in to his HSA account and needs to be refunded/paid to him.
What would be the best way to reverse this in GP? A separate payroll for this employee for $600.00 and a journal entry reversing the HSA? Or is there a better solution?
Thanks for any advice
I am by no means a Payroll Expert, we have multiple people within our organization, which bear that designation. Your solution sounds like the simplest one. That being said, our team tends to recommend the following 3rd party solution from Integrity Data for just such occasions.
Our Best Practice suggestion for refunding deductions and benefits is to process negative transactions using the exact same deduction and benefit codes used in the original transaction. Processing this way provides the following benefits:
There are typically two variations on this process as follows:
Refunding on the next pay period:
(Note about negative deductions with percentage method: On any deduction code that is a fixed amount, you can simply enter in a negative fixed amount in a payroll transaction batch. However, whenever you are using a deduction code that is a “percent” type like 401k, you can’t enter a negative percent. However, for the one-time refund, all you have to do is simply go to the deduction code for that employee and change it temporarily to a “Fixed Amount” method, process the negative transactions and then put the deduction code back to percent method. )
Refunding between pay periods:
GP won’t allow you to process a negative deduction unless there is at least $0.01 of earnings. Therefore, if you must refund between payperiods, you can follow same process as outlined in the “Refunding on next pay period” above, however you will also need to enter a pay transaction entry for earnings of a penny ($0.01).
Jeff Rowles, MCP
P/R & H/R Specialist
L. Kianoff & Associates, Inc.