HEALTH SPENDING ACCOUNT (HSA)

Health Spending Accounts (HSA’s) are becoming a popular component to group health and dental plans. They can also be an alternative to a conventional plan. An HSA is a flexible and cost-effective solution to meet the changing needs of employers and employees alike. It is an easy way for employers to offer choice and self-service to their employees.

What Is an HSA?

A pre-determined dollar amount is provided to employees at the beginning of each benefit year to cover medical and dental expenses. Similar to a conventional benefits plan, claims are submitted by employees and reimbursed at 100%, up to the pre-determined dollar amount available in the HSA. An HSA can replace a conventional benefit plan or exist alongside conventional medical and dental coverage.

How Does an HSA Work?

Employers allocate HSA credits into each employee’s account at the beginning of the benefit year. Employees may use the allocated credits as needed to cover eligible health-related expenses not covered under provincial health plans or by the benefits plan offered by the employer.

Such expenses can include:

  • Deductibles or co-insurance payments for health and dental benefits
  • Health or dental expenses in excess of maximum coverage amounts under your conventional plan
  • Various health-related expenses that are not covered under the employer’s plan but qualify under the Canadian Income Tax Act as a medical expense. A detailed list can be found on the Canada Revenue Agency website.

Tax Implications of a Health Spending Account

Advantages for an employer
  1. The cost of an HSA health plan is a tax deductible business expense.
  2. To be considered a tax deductible expense to the plan sponsor, a Health Spending Account must be a pre-set limit, which is 100% employer funded.
Advantages for an employee
  1. The benefits are received tax-free.

 

HSA’s provide employers with a solution that provides complete control over claims in a given benefit year. HSA credits that are unused within the benefit year remain the property of the employer and returned to them at the end of the benefit year.

Contact us to learn more about how Health Spending Accounts protect you.

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