Do you feel overwhelmed while navigating the world of health benefits, especially regarding health spending accounts (HSA)? HSAs in Canada are a flexible and tax-efficient way to cover healthcare expenses.
With this beginner’s guide here we break down HSAs in terms of what it is, what you need to know, how they work, and why HSAs in Canada are a valuable addition to your healthcare and financial planning.
What is a Health Spending Account?
HSAs are unique financial and healthcare tools. They allow employers and self-employed people to set aside a certain amount for their health-related expenses, making them healthcare tools.
Key features of HSAs in Canada
- Funds can be flexibly used across a wide range of healthcare expenses
- Contributions made by employers are tax-deductible
- Reimbursements to employees are tax-free
- No premiums or deductibles
- Plans can be customized according to the needs
- Unused funds can be rolled over to be used next year
How do HSAs in Canada work?
- Employers allocate a fixed amount of money into employees’ HSA account
- Employees incur healthcare expenses and submit bills and receipts for reimbursements
- The administrator verifies the claims and reimburses directly to the employee
The employer's contribution is a business expense, so it is non-taxable, and the reimbursements to employees are also tax-free.
What expenses are covered in HSA?
A wide range of medical expenses are covered under HSA. You can get the full list here.
- Prescription medicine
- Dental care
- Vision care
- Paramedical services
- Mental health services
- Medical equipment
- Fertility treatment
- Alternative medicine
How to get started with HSAs in Canada?
- Research and choose your HSA provider
- Set an annual budget
- Understand the rules and ensure your employees do too
FAQs about HSAs in Canada
- Are HSAs regulated by the government of Canada?
- HSAs are not directly regulated but must adhere to CRA guidelines.
2. Can an individual have both, a traditional health insurance plan and an HSA?
- Yes. It’s quite common as HSAs cover a lot of medical expenses that traditional plans don’t.
3. Can unused HSA funds be carried forward?
- It depends on your plan. Some plans allow it while others have a use-or-lose-it policy.
Disclaimer: The information provided in this blog or in any linked material is not intended and should not be considered a substitute for medical advice, diagnosis, or treatment. For holistic health advice and consultation, visit My Well Self
