Health Spending Accounts – A Better Benefits Option for Business Owners?

As a small business owner, you want to make sure that your family and your employees are protected. However, you may believe that providing Group Benefits is not available for your small company or is too expensive. There is another way. Consider an HSA – Health Spending Account.

HSAs are arranged by an incorporated company and all premiums are fully tax-deductible by your company. These are private insurance plans, providing owners and employees with tax-free health and dental benefits and other coverages that far exceed those offered by standard group benefit plans.

An HSA covers items such as dental examinations, medicine, chiropractic care and massages. But it also covers other expenses such as children’s braces; and health-related expenses for extended family members, such as a parent’s long-term care facility. Allowable costs are the same as what the Canada Revenue Agency considers a health deduction for income tax purposes.

As an employer, you can determine the value of your own HSA, and set a yearly budget for your employees. But this plan also permits employees to request higher deductions from their paycheque, to create a larger plan for themselves. For example, an employee facing $6,000 of children’s braces may wish to create a larger plan than you were intending.

These are pre-tax funds, which means the money will go much farther than paying the expenses directly and then claiming it on a tax return as a Medical Tax Credit (this claim is only permitted if the total medical expenses exceed 3% of your income).

One of the truly exceptional features of this plan is that you can top up an HSA at any time if you have used up your funds. You can also build up a cash reserve within the HSA to cover future anticipated expenses and, unlike group benefit plans, whatever money you don’t use just rolls over to next year. So, it also doesn’t matter if you have over-contributed this year.

Having become very popular overseas, many North American companies are going this route over offering rigidly controlled pools of money that you must spend within a given year.

HSAs are managed through an insurance company, so you have the assurance of knowing that it’s all properly administered. Call your Financial Advisor to start this conversation. Learn how an HSA can work for your corporation.