A Health Spending Account, according to CRA, is a private health spending plan set up by the employer instead of, or in addition to, an insured health and dental plan. It works by converting out of pocket, after tax personal medical expenses into a before tax Business expense. The savings are created by effectively writing off your medical expenses through your corporation.
This plan provides a cost effective method for employers to provide health plans for their employees as directed by Canada Revenue Agency.
Employees are empowered to select their own health and dental benefits. With these benefit packages, they select only the coverage they need. This streamlining process can lead to substantial savings for employers.
Advantages of the Health Spending Account:
- Tax deduction to the employer
- Tax-free benefits to the employee
- Employees select only the coverage they need
- Control Costs – employer decides the potential cost each year
- Flexible customizable plans
A wide variety of medical and dental services can be covered under a Health Spending Account:
- Professional Services
- Dental Services
- Hospital Services
- Prescription Medicine
- Apparatus and Materials (includes: repairs, replacement batteries, etc.)
- Medical Treatments (if prescribed)
How Do Health Spending Account Plans Work?
In a Health Spending Account Plan, the employer contracts with a third party administrator to manage their employee’s health benefits claims.
The employer determines the claim limits for the various classes of employees, and therefore the cost of the plan, and it is responsible for the cost of the claims, administration fee and any applicable taxes.
All employee claims are directed to DHC for authorization, to ensure they meet the criteria established by CRA.
Eligible claims are then reimbursed by DHC to the employee resulting in a non-taxable benefit to the employee.
List of CRA approved medical expenses
The following list identifies the medical expenses recognized by the Canada Revenue Agency:
Medical Expenses
List of CRA approved medical practitioners
The following list identifies the health care professionals recognized by the Canada Revenue Agency:
Medical Practitioners
Advantages of Health Spending Account Plans
A Health Spending Account Plan provides employers with a convenient way to deliver tax effective compensation, provide employees with greater flexibility, and cap service (through a defined contribution as opposed to a defined benefit.)
Employees are empowered to select their own health and dental benefits. Successful plans increase employee understanding of their benefits. With these benefit packages, they select only the coverage they need. This streamlining process can lead to substantial savings for employers.
- Tax deduction to the employer
- Tax-free benefits to employees
- Little or no administration for employer
- No exclusions
- Control costs – employer decides the potential cost each year
- Flexible plans
- Easy to use
HSA Reporting
Is done as required
HSA Fees
DHC charges an administration fee for all claims processing. GST is payable on the administration fee portion of the claim only.
There is no start up fee or annual fee. If you do not submit any claims, it costs you nothing.
How to Enroll
Enrollment is typically easy and straightforward. The amount of flexibility you require for the implementation of your Health Spending Account Plan will determine the exact steps required for enrollment.
Please contact your friendly support staff for assistance in this process.