What is a health spending account?
A health spending account (HSA) provides a tax advantaged way for you to cover your medical expenses, and to provide health benefits to your employees.
Qualifying for a HSA
If you have an incorporated business, you can apply for an HSA. If have an unincorporated business, or sole proprietorship, you must have at least one arm’s length employee to be eligible. An arm’s length employee is not related to you and is independent of you.
HSAs for self-employed individuals
An HSA is perfect for self-employed individuals who do not have extended health insurance or who have costs that exceed, or are not covered by, traditional health insurance plans.
HSAs for small businesses
An HSA is also ideal for small, and growing, businesses who are looking for affordable ways to offer benefits to their workers. Employees can choose exactly how to spend their plan dollars, providing much more flexibility than tradition health insurance plans.
You can run health, dental and vision expenses through your corporation, and write-off 100% of the costs related to the HSA, and lower your tax bill. The expenses are reimbursed tax free to you, and your and employees.
Controlling the cost of health and dental benefits
If you have employees, HSAs provide cost certainty. You know up front how much you will spend on benefits each year. And if your employees make no claims, the business isn't out-of-pocket anything.
What is covered
HSAs cover a broad array of health, dental and vision expenses, including some that are not covered by traditional insurance plans such as plastic surgery and orthodontics. An employer can choose which expenses are covered by the HSA, and the portion of the expense that the account will cover. Most employers decide to cover 100% of eligible medical expenses.
Allocating HSA expenses
You can decide to allocate the full amount of your HSA yearly, or more frequently. Some business owners choose to allocate more frequently to avoid large health expenses being withdrawn from their account.
If you have multiple employees, you can set up different spending limits for different categories of workers. For example, your directors and long-term employees might have higher spending limits than your entry level staff.
In some cases, you or your employees might not use the full amount that was allocated to your HSA. You can choose to have unspent health benefits carry over to the following year, or to be terminated if not spent. Some business owners choose to terminate these benefits to effectively manage their health expenses others allow the expenses to roll over to the following year as an incentive to their employees.
Cost of the HSA
There are no setup or monthly fees for an HSA. There is an administration fee of 10% plus applicable provincial taxes on each claim.
You or your employees will submit claims online or through an app. These claims are usually paid within 1-3 business days.
HSA claims are withdrawn from your corporate account. You register your corporate account when you apply for the HSA. You will receive an email notification before the claim amount is withdrawn from your corporate account. This will give you time to deposit the necessary funds before the claim is withdrawn.
How to apply
You fill out a short application online at Bounc3. It takes 2 minutes and requires no paperwork.