Health Spending Account (HSA)
What is a health spending account?
- An HSA is a Canada Revenue Agency approved method to provide medical, dental and vision benefits in a tax efficient manner
- A corporation can write off 100% of the costs related to its HSA
- All expenses reimbursed are tax-free to the employees
Types of expenses that are covered
- The employee may claim for any medical expenses that are allowable under the Income Tax Act: Canada Revenue Agency
- This is a very wide range of services that include many items that are not typically allowed under a normal group benefits plan
Typical client for a Health Spending Account?
- Every business owner who has an incorporated company should have one
- It is the most tax effective way to run health, dental, and vision expenses through the corporation
- If an employer wishes to offer benefits to other employee classes, they can create a custom plan for each class
Who can qualify under a Health Spending Account?
- The employer has complete control over which employees are covered under the plan and what amount they give them to spend
- The employees are “classed” at the start of the benefit term and the limits of coverage are set based on certain criteria designed by you and your broker
- The employer has complete control of which employee receives the benefit of the HSA and can add or delete them at any time
Is this a fit for my company?
If any of these questions or comments have crossed your mind when buying an employee benefits plan, then an HSA may be for you:
- The cost of having an insured plan does not make sense due to the number of employees our company has to provide it for
- Our costs of insurance premiums are increasing every year as we are pooled in a plan that does not take our claims into consideration. (By not claiming, we seem to be supporting the others that are claiming)
- With the demographics of our employees being older or younger, the plan seems to be designed for one or the other, not both. (i.e. orthodontics for employees with kids). Employees in both demographics desire flexibility
- We want to provide flexibility in our benefits plan, we do not want to govern what employees spend their coverage on. We want to provide flexibility for them to decide
- We are tired of having to prefund our benefits whether our employees use them or not
- We want to budget for and control the cost of our employee benefits plan
What is the claims process like?
- If an employer does not have a traditional benefits plan, an HSA can be used to provide a complete range of coverage including medical, dental, and vision benefits to employees who otherwise could not get employer sponsored benefits
- If an employer has a traditional insured group benefits plan, an HSA can be used to “carve out” infrequently used coverage such as orthodontics or vision care and make these types of benefits available in a Health Spending Account
To find out more about Health Spending Accounts, contact your MDL Benefits Specialist.