How SimplyHRA Works with Gusto: Employee Data, ACH & Pre-Tax Payroll

If your company runs payroll on Gusto and wants to provide tax-free healthcare allowances without the unpredictable rate spikes and participation minimums of traditional group plans, an Individual Coverage HRA (ICHRA) is the modern standard. While Gusto offers traditional group health insurance through its internal brokerage, employers do not need a complex API plugin to offer an ICHRA. Instead, SimplyHRA works cleanly alongside Gusto using native, standard payroll workflows: exporting employee census rosters, categorizing tax-free reimbursement ACHs, and establishing pre-tax Section 125 cafeteria plan deductions.

Pillar 1: Exporting Employee Data from Gusto to SimplyHRA

To establish an ICHRA, an employer must define eligible employee classes (such as full-time, part-time, salaried, hourly, or geographic rating areas) under 26 CFR § 54.9802-4. SimplyHRA needs basic demographic information to calculate compliant allowance structures and verify marketplace affordability safe harbors.

Rather than manually typing employee details, employers use Gusto's built-in export functionality to generate a clean roster in under two minutes.

Step-by-Step Roster Export in Gusto:

1. Log in to your Gusto Employer Dashboard.
2. Navigate to the left navigation menu and click Reports → Custom Reports (or navigate to Settings → Employees).
3. Create a report titled "SimplyHRA Census Export" and select the following employee attributes:
   • Legal Name: First and Last Name
   • Date of Birth: Required for age-banded affordability safe harbor calculations
   • Home Residential ZIP Code & State: Required to identify the employee's local ACA rating area and Second Lowest Cost Silver Plan (SLCSP)
   • Employment Status: Full-Time, Part-Time, Seasonal, or Contractor
   • Department / Location: Matches your defined ICHRA employee classes
   • Work Email: For automated employee onboarding and invitation links
4. Click Generate Report and download the resulting file as a CSV.
5. Log in to your SimplyHRA Employer Portal, navigate to Onboarding & Census, and upload the CSV file. SimplyHRA automatically maps the headers, groups employees into their assigned classes, and generates compliant plan enrollment documents.

Pillar 2: Categorizing ACH Transactions & Health Reimbursements

One of the primary benefits of using SimplyHRA is payment independence. Traditional benefits administrators often require employers to run every reimbursement through payroll batches, adding administrative overhead and confusing tax reporting. SimplyHRA offers multiple funding rails while keeping accounting completely transparent.

Workflow A: Direct Automated ACH Reimbursement (Recommended)

In this streamlined model, SimplyHRA manages the entire reimbursement workflow independently of your payroll calendar:

1. Employees upload their monthly health insurance premium proof (carrier invoice, bank receipt, or payment confirmation) to their secure SimplyHRA portal.
2. SimplyHRA’s automated adjudication engine verifies that the coverage meets ACA Minimum Essential Coverage (MEC) standards under IRC Section 105.
3. Approved reimbursement amounts are drawn directly from the employer’s designated operating bank account via secure ACH and deposited into the employee's checking account.
4. General Ledger Reconciliation: In your accounting software (QuickBooks, Xero, or NetSuite synced with Gusto), the SimplyHRA ACH bank debit is categorized as "Employee Benefits Expense — Health HRA (IRC § 105)". Because these reimbursements are 100% tax-free, they do not trigger payroll taxes, state unemployment taxes, or federal withholding.

Workflow B: Processing Non-Taxable Reimbursements Through Gusto Payroll

If your finance team prefers to combine all employee disbursements into standard payroll direct deposits, you can pass SimplyHRA approved totals into Gusto using a custom non-taxable earning code:

1. At the close of each monthly claims window, export the Monthly Payroll Reconciliation CSV from SimplyHRA.
2. In Gusto, navigate to Settings → Pay Items → Custom Pay Types.
3. Click Add Custom Earning and select Reimbursement (or Non-Taxable Health Reimbursement).
4. Under tax treatment settings, confirm that Gusto classifies the item as Exempt from All Taxes (exempt from Federal Income Tax, Social Security, Medicare, FUTA, and State Income Tax).
5. When running regular payroll, enter the SimplyHRA approved reimbursement amount into this custom line item. The reimbursement is added to the employee's net check without inflating their taxable gross wages or Form W-2 Box 1 compensation.

Pillar 3: Setting Up Section 125 Cafeteria Plans in Gusto

In an ICHRA, an employer provides a fixed monthly allowance—for example, $400 per employee per month. If an employee chooses a Silver plan costing $400, their net cost is zero. But what happens if an employee selects a richer Gold plan costing $550 per month?

The employee is responsible for the $150 variance. Under federal rules, employers can allow employees to pay this variance using pre-tax salary deductions through an IRC Section 125 Cafeteria Plan.

Step-by-Step Configuration in Gusto:

1. In your Gusto Employer Dashboard, navigate to Settings → Deductions & Contributions (or Benefits → Add Custom Benefit).
2. Select Add Custom Deduction and set the category to Pre-Tax Medical / Health Insurance.
3. Name the deduction "ICHRA Employee Premium Share (Section 125)".
4. Select the deduction frequency matching your pay cycle (e.g. split evenly across 24 semi-monthly or 26 bi-weekly payroll runs).
5. Assign the specific monthly deduction amounts for employees whose individual health premiums exceed their SimplyHRA monthly allowance.

Financial Impact of Section 125 Salary Reductions

Why SimplyHRA + Gusto Beats Traditional Group Insurance

Frequently Asked Questions About SimplyHRA and Gusto

Does SimplyHRA require an API integration with Gusto?

No. SimplyHRA operates on independent payment and compliance rails. You do not need to install an app from the Gusto App Directory, grant API tokens, or manage brittle webhooks. You simply export your standard employee census CSV from Gusto during onboarding, and use Gusto's native custom pay types or pre-tax deduction tools for monthly payroll reconciliation.

Are ICHRA reimbursements subject to payroll taxes in Gusto?

No. When administered under an IRS-compliant ICHRA plan document through SimplyHRA, health insurance reimbursements are completely excluded from employee gross income under IRC Section 105(b). They are exempt from federal income tax, state income tax, Social Security, and Medicare taxes, and do not appear in Box 1 of Form W-2.

Can employees use pre-tax payroll deductions in Gusto for their share of individual health premiums?

Yes, provided the employee purchases an individual health insurance policy outside the public exchange (off-exchange). Under IRC Section 125, employers can deduct the difference between the employee's premium and the employer allowance on a pre-tax basis. Policies purchased on HealthCare.gov or state exchanges cannot be paid via pre-tax deductions.

What happens when a new employee joins Gusto?

When you hire a new employee in Gusto, simply add them to your SimplyHRA portal using their name, date of birth, home ZIP code, and employment class. SimplyHRA generates their mandatory 90-day written notice and guides them through their 60-day Special Enrollment Period (SEP) to select an individual health plan.