Good news, opening a Health Spending Account (HSA) couldn’t be easier!
An HSA is super simple for an organization to set up, and super flexible for plan members to use. It’s a win-win. Just follow the steps below and you’ll be on your way!
Choose your style
HSAs come in a few different flavours. Each one follows the same premise – the plan sponsor makes contributions (which are tax-deductible!), then the plan members use these funds to reimburse their eligible medical expenses (tax-free!).
Where you have some choice is who owns the funds in the HSA and what happens to these funds after a benefit period. We have three options:
HSA Classic – the ultimate flexibility for members
Once contributions are made to an HSA Classic, they become the property of the members. This means members can carry funds forward, allowing them to budget for future expenses (think braces down the road). Even if the member leaves the organization the funds remain in their HSA until exhausted.
HSA Rollback – potential savings for plan sponsors
Funds contributed to an HSA Rollback remain the asset of the plan sponsor. After a predetermined period (up to 2 years) any balances left in plan member HSAs are reset and funds are returned to the plan sponsor. Plan members don’t have as much flexibility to budget for future expenses however plan sponsors may recoup some of their benefits costs.
HSA Rollover – equity for all through an RRSP
An HSA Rollover combines an HSA Rollback combined with a Group RRSP. When funds are reset and returned to the plan sponsor we help them invest those funds in a Group RRSP on each plan member’s behalf. Setting up an HSA like this gives every member equal value from the plan, regardless of whether they have medical expenses or not.
So which type of HSA is right for you? It all depends on how you want to run your organization and what you want to provide plan members. Chat with the Blendable Growth Team and we’ll walk you through the pros and cons of each option so you can make an educated decision.
Define your classes
While insured health and dental limits are typically set for singles, couples, or families, HSAs are, you guessed it, more flexible! (That means you can create a fair and equal benefits plan). You can define different groups of plan members any way you like.
We call a group of similar plan members a class. Popular options to define classes include:
- Hours worked (e.g., full time or part-time)
- Seniority level (e.g., coordinator, manager, director, executive)
- Job position (e.g., labourer, supervisor, office staff)
- Family status (single, couple, family)
The key is that the definitions are a reasonable way to differentiate plan members and keep things fair and equal when it comes to the next step – contributions.
Set your contributions
Now that you’ve separated your plan members into reasonable classes, you can set the amount each class should receive. Everyone in a class must receive the same contribution – that’s what keeps the HSA fair and equitable for all plan members.
Contributions can be made monthly or annually – whatever works best for your cash flow and budgeting. Our Growth Team can help with this decision because the timing you choose can have an impact on how members budget for expenses and what happens if a member leaves.
One form and done!
You’ve chosen your HSA style, defined classes, and set contribution levels. All that’s left is to fill out an HSA activation form, so we have your instructions in writing.
Ready to set up an HSA for your organization? Get in touch. We’ll have your benefit costs under control in no time!
