Used by thousands of business owners across Canada, a Health Spending Account can be used as a top-up or an alternative to a traditional benefits plan. It provides reimbursement for eligible health care expenses or other benefits not covered by provincial health insurance.
Depending on the size of an organization, and the needs of its employees, it can be a very cost-effective option that still offers employees considerable coverage.
Anyone who pays taxes, owns a business, or has employees should consider this option and the benefits that can positively complement your organization’s needs. The most significant benefits, as well as some of the drawbacks, are considered here.
The Benefits
Cost Savings
An HSA enables a businesses of any size to deduct 100% of incurred health and dental expenses. Businesses and employees both enjoy large tax reductions; for employees, this can mean more than 30% savings on medical, dental and other health-related expenses. As well, an HSA can be paired up with high-deductible health insurance plans, resulting in lower monthly premiums than traditional group insurance plans.
Because of the shared savings between both personal and business taxes, the HSA is a common choice for many entrepreneurs and independent contractors. For businesses, it is a means of attracting and retaining quality employees by directing funding to specific benefits.
Cost Control and Flexibility
The employer can choose an exact dollar amount to contribute to the HSA, keeping complete control over their medical spending. This is an added benefit as well for those wishing to customize the plan for different employee classes.
As well, funds within the HSA can be withdrawn by the plan member at any time for medical expenses and can roll over into the second year if unused in the first year. They accumulate tax-free income without forfeiture and thus can be used to build up savings for future health and dental expenses.
Employees enjoy the flexibility of being able to choose where their HSA dollars are spent, rather than traditional plans where full benefit amounts are not always used.
The Drawbacks
Health Spending Accounts are designed to deal with fairly routine medical expenses rather than those of a catastrophic nature. As well, there are limitations on total dollar amounts available to employees.
