Health Spending Accounts
Health spending accounts (HSA) have been gaining popularity with employees and employers over the past 10 years due to their undeniable flexibility. In simple terms, an HSA is a tax-free account funded by the employer, which employees can use to recoup medical expenses that are not covered under any other plan.
The employees may use the funds only for allowable medical expenses. For example, one employee may use it for glasses, another for teeth whitening, and another for orthodontics. We have one client that purchased a treadmill because of doctor’s orders to walk more. It can also be used for covered expenses if they have co-payments. The full list of Canada Revenue Agency (CRA) approved eligible expenses is here.
How does a HSA work? The employer allocates a predetermined amount for each employee to their HSA for the benefit year. This allocation is then drawn on by the employee as expenses are incurred. The money is tax deductible for the company, and employees are not taxed when they access funds from their HSA. The terms are different for each product provider, but we have access to a range of HSA options and we know we can find the right one for your company.
Imagine that! Every contribution made by the company is 100% tax deductible, yet every benefit paid is tax free to the employee. That makes it a huge win/win tax benefit for both parties!
Some companies, especially small businesses, are opting to offer HSA’s instead of more traditional health insurance as the benefits are very flexible. One of the advantages of a HSA is that it can address the varying needs of a diverse workforce, and offer help even if there is an unexpected change in circumstances. It is difficult to know if your company needs a more traditional group health and dental plan or if a HSA is a better option, but we can help you work through the options and offer the most effective plan for your employees.
Having employees with HSA’s can help maintain a healthy workforce who are more engaged in their personal wellness, and more aware of its cost. This new awareness may lead to lifestyle changes and increase company loyalty because their benefits meet their needs.
All employees can benefit from a HSA, from the company owner down to the most junior employee. The benefits are flexible enough to help most employees in a variety of wellness scenarios.
At Erven Planning, we will work with you to find the right Health Spending Account provider for your company and your employees at the best price – ask us!