Over the years, I continually get questions and more recently now, (probably as it is TRIPLE tax advantage) how should I correctly setup a Health Savings Account (HSA) in Microsoft Dynamics GP?  Well that is a GREAT question.  As you go through this blog, I'm not stating there is a right or wrong way to set this up, but this is the way I would recommend it to be setup and what seems to work for most customers.

In years past, some have used the direct deposit linked deduction trick.   It works, but some issues I have with it is the following:

1. When you use linked deductions, because you are "tricking" the system to cut two checks during a payroll process, only one amount updates bank rec, not both the net check and the deduction.  What happens in this case, customers bank rec is then out of balance.

2. Linked deductions would only account for the deduction side of it not a benefit for HSA.

The approach I feel is more encompassing is set your HSA information up with Payroll Integration to Payables also known as PIP.  When you set it up in this fashion, you can link both your deduction and benefit to the Payables Vendor (in this case it would be the employee) Once the payroll is posted, the information automatically updates the Vendor card (the employee).  This creates an 'invoice' waiting to be paid in payables.  You can either cut a physical check or what most do is an EFT to deposit the funds to the appropriate employee HSA account.  With this approach you will be able to set the PAY account right in the Payroll Vendor setup window to offset the deduction which creates a credit when posted.  This is the account that will be used as the PAY distribution for the invoice created in Payables.

When you think through the scenario it fits very well with how PIP is typically used.  When a deduction is taken from an employee in payroll, Microsoft Dynamics GP assumes that you are withholding a value from the employee that needs to be paid somewhere else, such as insurance, 401K, child support, taxes, etc.

With the PIP changes made in GP 2016 R2, you can define an address and distribution account in the PIP setup, this works nicely with the HSA account setup.

In Microsoft Dynamics GP you can assign the vender to the transaction type in the Payroll Vendor Setup window (Microsoft Dynamics GP >> Tools >> Setup >> Payroll >> Payables Integration >> Vendor).

In my example, I have a $100.00 deduction for HSA and a $50.00 benefit for employee Minnie Johnson.  I have also created a vendor record for this employee to link my information too.

      

Make sure to include your deduction and benefit in the payroll process.

Once the payroll has been posted, it will create a batch on the payables side for the vendor information, in this example, my HSA amounts.

You can see I have a total in the batch of 2 transactions for $150.00 attached to my Vendor, Minnie Johnson to go to their HSA account, and YEP, it is just that EASY :-)

PIP, Payroll Integration to Payables, has been around for a long time, so you can use these basic steps in any of the Microsoft Dynamics GP versions.

Enjoy!

Terry Heley

Microsoft