Self-insuring gives the employer control in designing the plan and costs.
Unique goals and needs of individual employers can be addressed without the task of searching for plans which may or may not meet all your requirements. Self-insuring allows you to achieve significant savings and flexibility. Plans use pre-tax dollars to fund the costs of health and dental expenditures, greatly reducing the cost to your company. In some cases, the use of an HCSA can result in savings of 30 – 40% per year for your companies medical, vision or dental related services.
Health Spending Accounts
Health Care Spending Accounts provide a way for businesses to pay health and dental expenses in a tax-effective and cost-efficient manner. A traditional benefit plan takes a one-size-fits-all approach, providing the same benefits for all employees. Health Spending Accounts can be used:
- As an alternative for business owners who find the cost of personal Health and Dental Insurance prohibitive.
- As an alternative for employers who want to offer their employees a benefit plan but don’t have the budget for a traditional Group Insurance plan.
- To enable employees to tailor benefits to suit their own needs by allocating funds to specific areas of eligible healthcare expenses that meet their individual requirements.
How does a HCSA work?Every year, employers choose a specific dollar amount to contribute to each employee’s individual account. The contribution must be the same for every employee in a given class. Each dollar contributed equals one credit in the employee’s account. The employee is able to use his or her HCSA credits to pay for eligible healthcare expenses.
What are the advantages of HCSAs?When HCSA guidelines are followed, contributions are tax deductible to the employer. Benefits paid are not taxable to the employee. Without a HCSA, eligible expenses not covered by a benefit plan must be paid for by employees with after-tax dollars. HCSAs provide for payment of healthcare expenses with pre-tax dollars, enabling this alternate form of compensation to go further than if the employee had received the same compensation in the form of salary or wages.
Are any companies restricted from establishing a HCSA?HCSAs are not available to unincorporated business owners.
What types of expenses can be paid for by using HCSA credits?
Employees may use HCSAs to pay for any expense allowed by the Canada Revenue Agency under Section 118.2(2) of the Income Tax Act, and as stated in Income Tax Bulletin IT-519R2 Medical Expenses. They are the same expenses as those allowed under the Medical Expense Tax Credit, although any expense paid for by a HCSA cannot also be claimed as a Medical Expense Tax Credit. HCSAs can also be used to pay for eligible expenses that are not covered by a core benefit plan, to pay for co-insurance amounts, or to top up a core benefit plan when the maximum benefit amount has been paid.
Can HCSA credits be used by anyone other than the employee?Yes, HCSA credits can be used for eligible expenses incurred by the employee’s spouse, or other dependents who are covered for benefits under the Office Supervisory Plan, for whom the employee is entitled to claim a Medical Expense Tax Credit under Canada’s Income Tax Act.