Offer increased flexibility with a Health Care Spending Account

Plan sponsors looking to offer increased personalization and flexibility for plan members, while limiting their exposure to health-care inflation, may want to add a Health Care Spending Account (HCSA) to their benefit plans.

What is a HSCA and what does it cover?

An HCSA is an account for individual plan members, fully funded by plan sponsors with a pre-determined annual allocation. Plan members can use the funds to pay for:

  • Expenses paid out of pocket, in excess of insured Health and Dental plan maximums.
  • Private plan deductibles.
  • Expenses not reimbursed by private plans that are eligible under Canada Revenue Agency guidelines. This includes both expenses for plan members and any eligible dependent.

What are the advantages?

For plan members an HCSA increases the scope of the benefit expenses that are eligible for reimbursement, allowing plan members to personalize coverage to address individual needs. Expenses reimbursed through the HSCA are non-taxable to plan members outside Quebec.

For plan sponsors, an HSCA can:

  • Limit exposure to health-care inflation or plan member usage
  • Make it easier to budget, as plan sponsors determine the amount to deposit in member accounts each year
  • Provide tax benefits, as plan sponsor contributions and administrative expenses for the HCSA are tax deductible as a business expense

How does it work?

Eligible expenses are first reimbursed under the health or dental plan, with any unpaid portion being reimbursed through HCSA funds.

Plan members have access to the full annual contribution amount on the first day of the fund year. As claims are paid from the account, HCSA balances are updated. This ensures claims are not paid in excess of the available balance.

All HSCAs include a “use it or lose it” feature, where unused funds can be carried forward one year. At the end of year two, any remaining unused funds are returned to the plan sponsor. These funds must be reinvested by the plan sponsor in their benefits offering to remain tax-free. Unused funds are immediately forfeited upon termination, retirement or death.

What options are available?

Plan sponsors can choose between two options:

  1. Budgeted – target amounts are billed monthly to the plan sponsors
  2. Non-budgeted – plan sponsors are billed in arrears based on the monthly paid claims. A deposit is required.

For more information, contact your Group Benefits Representative.