Health Spending Account (HSA)
Many employers choose to provide Health Spending Accounts for their employees to supplement their group insurance benefits. By choosing a Health Spending Account, the employer is provided with certainty over costs, while giving employees the flexibility to design and customize a benefits program that fits their individual needs.
What is a Health Spending Account?
A Health Spending Account (HSA) is a self-insured Private Health Services Plan arranged by the employer for employees residing in Canada. The Health Spending Account provides reimbursement for eligible medical and dental expenses using pre-tax dollars. A defined amount of money is allocated into an account for all employees with an eligible classification. Throughout the year, these funds may be used towards claims reimbursement for various eligible expenses as outlined by Canada Revenue Agency (CRA) in Bulletin IT-519R2.
What are the Advantages of a Health Spending Account?
- Tax Effective – An HSA offers tax advantages to both the employer and employee. Reimbursements and administrative fees are tax deductible for the employer. Funds used towards reimbursement are non-taxable to the employee. (With the exception of Quebec residents which are taxed at the Provincial level.)
- Defined Contribution – Employers have complete control over the amount they contribute to the HSA plan, as the monetary value is determined in advance. There are no annual renewals, reserves or inflation factors to contend with.
- Empowerment – Employees are in the position to decide how their benefits dollars will be spent.
- Flexibility – All employees face ever-changing circumstances in their lives. The plan options that are available with a HSA allow the employer to make the program diverse enough to meet their needs.
- Employee Satisfaction – Employees can use the HSA towards a variety of expenses rather than using their own after-tax dollars. Additional benefits for items not covered under the traditional group benefits plan.
- No Medical Underwriting – A pre-existing medical condition does not preclude an employee from being covered. There are no medical questionnaires to complete.
What is required to set up a Health Spending Account?
Under CRA guidelines, there is a required obligation under the employment contract for the employer to agree to reimburse the eligible medical expenses of its employees as defined by the Health Spending Account program. To document this obligation, a Health Spending Account contract will be created between GroupSource and your organization.