Health Spending Accounts
A Health Spending Account (HSA) is a non-taxable supplement and/or alternative to a traditional group or individual health and dental plan.
An HSA is a Canada Revenue Agency approved method to provide medical, dental, and vision benefits to employees in a tax-efficient manner. Corporations can deduct the costs related to an HSA, and all expenses reimbursed are tax-free to employees (including the company owner when they actively work in the business).
Who should have an HSA? Most incorporated business owners with active business income are eligible to have an HSA. It is the most tax-effective way to pay for health, dental, and vision expenses. When an employer offers group benefits to their employees, they can structure a plan to offer different classes of employees different benefit options.
Who can qualify under an HSA? Employers have complete control over which employees are covered under the plan and what amount they can spend. Note: All employees in the same class must be offered the same benefits per CRA guidelines.
Health Spending Accounts - Our cost summary:
The only fee paid is the admin fee when a claim is made. If you never use it it, there is no cost to you.
myHSA as an alternative vs. supplementary plan
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.
Covered expenses. The list of covered expenses includes many items not typically allowed under a regular group benefits plan. Our pre-populated list is taken directly from the CRA (see “Summarized List of Items” page for more information).
Eligibility. An HSA is an employee benefit and not a shareholder’s benefit. When setting up the plan, please make sure the following conditions have been met:
1. It Must be an active business. It cannot only generate passive income.
2. The benefit is available to all employees in a given class, including those who are neither a shareholder nor related to a shareholder (regardless of whether they have chosen to participate in the plan); or
3. If the benefit is not available to all employees, but there is a logical reason to exclude some employees; or
4. It is reasonable to conclude that the benefit has been provided as part of a reasonable remuneration package for the individual as an employee; or
5. The benefit is comparable to that offered to non-shareholder employees of businesses of a similar size who perform similar responsibilities.
No pre-funding is required. Pay-as-you-go funding, where notifications are sent to the company administrator whenever an employee claim is submitted (the claim details are always private).
If there’s anything you’re unsure about and would like to discuss further, please don’t hesitate to contact us. We're a click or a call away.
A video detailing our HSA user experience:
