Also known as HCSA and Health Spending Account (HAS), is an account for an individual employee which provides reimbursement for any eligible health care expenses. Also, it covers other benefits that may not be covered under our provincial health insurance plans or by your employer.
These Spending accounts are a simple, tax-effective way to provide flexibility to health and dental benefits.
They can be the answer to a situation where the employer wants to offer their employees increased involvement and more choices in their benefits. Via the Health Care Spending Account, any employee can use pre-tax dollars to pay for expenses that would usually be considered out-of-pocket expenses (except in Quebec where income tax purposes differ).
Traditional plans don’t offer the same flexibility as an HCSA. Along with the usual expenses that get reimbursed, the HCSA can provide reimbursement for the following:
- Prescribed but over-the-count medications
- Home renovations to accommodate life-altering situations
- Daily or weekly home care
- Cosmetic surgery
This account can also be used to pay any deductibles, co-insurance amounts that are in excess of the existing benefit maximums, and overall broaden the scope of coverage for an existing plan. For example:
- Dental services such as caps, bridges, crown, orthodontics, (also expenses that are above the plans annual max amount).
- Medications not included in the plans drug explanation list
- Eyeglasses, contact lenses, (if not covered by existing plan or are above the plans annual max amount)
- Chiropractor or physiotherapy professional services.
The Nuts & Bolts of a Health Care Spending Account
Heath Care Spending Accounts that are funded completely by the employer are provided on a stand-alone basis. Each member receives an equal amount of funds from their employer.
Flexible benefit plans can be funded by both an employee contribution as well as their employer. Employee contributions are funded by what’s called “flex credits” instead of the usual direct deposits. In this case, employee contributions would be deducted from payroll on an “after-tax” basis, which would eliminate any tax advantage of having the HCSA.
An employee along with their dependents covered, utilize the HCSA to pay for eligible medical expenses that are not covered by the employee or their spouses existing medical plan. The balance is reduced by the amount of each reimbursement until the account balance is zero.
Any unused balance at the end of the year will be carried over for another year, however, if after two years the funds have not been used, they are then forfeited back to the employer. On the other hand, any unclaimed expenses for any given year will be carried forward for a period of a year. However, the plan can’t include both the carry-over account balance and the unclaimed expenses amount.