Health Spending Account

Frequently Asked Questions

Does everyone need to participate in the Health Spending Account?
Yes, each eligible employee should participate unless it is structured as part of a flexible benefit plan. Within a flexible benefit plan, employees can choose not to direct funds to the Health Spending Account.

Are there any limitations in the benefit schedule?

The benefit schedule may be changed each January.

There is no minimum contribution.

There is no maximum contribution but shareholders should be treated similar to non-shareholders.

What happens to the unused deposit balance in employee accounts at the end of the year?
Your plan can be setup so that the unused deposit balance carries forward to the next year and becomes the employee’s opening balance. The deposit balance can only carry-forward once. If it is not used by the end of year it is refunded to the employer. Alternately, your plan can be setup so that the unused deposit balance is refunded to the employer at the end of each year and employees carry their unused claims forward.

What claims are eligible?
Visit Common Claims and Special Claims for a description of eligible claims. The eligibility of therapists is based on the employee’s province of residence. In Ontario, registered massage therapists (RMT) are covered.

What happens if a claim exceeds the balance in the employee’s account? The amount in the account is paid immediately and a claim cheque is automatically issued each time a deposit is received until the total claim is paid or the end of the calendar year is reached.

Why haven’t I heard about Health Spending Accounts before?
There is little incentive for the benefits industry to promote a product with low margins. Insurance companies charge a 50% mark-up on claims to most of their clients while the mark-up on an HSA is only 10%.

How long have Health Spending Accounts been available?
Health spending accounts have been a popular component of flexible benefit programs of large Canadian employers since the 1980s. In 1993, Benefits Interface designed a streamlined administration system that eliminated the need for fixed charges, which made HSAs affordable to an employer of any size.

What monthly contribution should be made to a Health Spending Account?
It depends on the objective of the benefit program and the needs of your staff. Many clients have a contribution schedule that varies by position, seniority or income. In 2001 the contributions range between $25 for part-time staff to $500 for key staff. The average contribution was $125 and mean was $110.

Are the contribution to my Health Spending Account safe?
Contributions to your Health Spending Account are deposited in a non-segregated trust account held at the Desjardins Credit Union. Benefits Interface, Inc. carries $5 million of errors and omissions insurance with a $1 million extension for fraudulent acts.

Should I use the Deposit Carry-forward method or the Claims Carry-forward method?
The income tax rules allow either the unused contributions or unpaid claims to be carried forward for one calendar year. Most clients select the Deposit Carry-forward because it encourages wise purchase decisions and accumulate funds for future needs. While the Claims Carry-forward method does encourage employees to spend their contributions before the end of the year, it can be used effectively as part of a flexible benefit plan or variable compensation program.

How to I implement and Health Spending Account?

Mail a signed application, along with a quotation and cheque for the first monthly remittance.

Approve or revise the draft employee booklet cover that will be e-mailed to you within a day of receiving the application.

A copy of your application, confirmation of remittance and employee booklets will be sent to you within two business days of approving the booklet cover.

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