Small business owners who truly care about their employees will always be looking for the best health benefit plan available to them, no matter the size of the company. While there are benefits to traditional group insurance plans, there is also great value in offering a Health Spending Account (HSA) for employees.
HSAs have been in existence for many years, and today thousands of small businesses in Canada have these plans in place for their team. Health Spending Accounts are set up through insurers or qualified third-party administrators who specialize in this area. These cost-effective accounts cover a variety of qualified medical expenses, making it convenient for both the employer and the employees.
Benefits of Health Spending Accounts for Corporations
Simply put, an HSA allows eligible small businesses to create accounts (similar in style to an RRSP) with pre-determined amounts for their employees to use to pay for their medical expenses on a tax-free basis. The deposits that businesses make also reduce the corporation’s taxable income, as these are tax-deductible, making HSAs an attractive option for smaller businesses that may not be able to afford high monthly premiums.
Small business owners also benefit by knowing from the onset how much their employee’s benefits will cost, as HSA deposits are fixed and do not change or fluctuate throughout the year. They also do not increase each year at renewal offering employers less hassle and more clarity for employee healthcare expenses.
Benefits of Health Spending Accounts for Employees
The flexibility of a Health Spending Account is appealing to employees, as each individual can make the decision about how their allocated money is spent. From prescription drugs to dentist’s visits, eligible medical costs are covered up to the funding limit. These non-taxable benefits come with no deductibles, co-payments, or annual limits (other than the amount of funds deposited into the account) that often accompany traditional insurance plans.
Employees are able to submit eligible claims and be reimbursed using their HSA without tax penalty at any time, and individuals can choose to put their funds toward what is important for their own health. Those with pre-existing health conditions will find that their expenses are also covered, and there is no age limit with Health Spending Accounts.
Who is Eligible for HSAs?
The good news is that group health insurance plans are not the only options for entrepreneurs and small business owners. Health Spending Accounts can be used as a stand-alone benefits plan or part of a more traditional fully-insured plan and work for groups of all sizes.
- When a business is incorporated, it may take part when the business has as few as one employee. In order for shareholders to participate, they too must be salary-earning employees.
- For those businesses that are unincorporated, there must be at least one arm’s-length employee.
Millions of Canadian small business owners could benefit greatly from the budget certainty and the flexibility of a Health Spending Account (HSA). If you are interested in how this type of plan can help your business and your employees, contact your Advisor today!