Around here, we value flexibility. Flexibility in how you design a benefits plan, in how you work with your benefits provider, and flexibility in how you live your life. That's why we think that Health Spending Accounts (HSAs) are awesome! They give plan sponsors and plan members the most flexibility in their benefits plan.
Let's dive into how HSAs are set up, what that means for eligible expenses, what isn't covered by an HSA (it's a short list), and some eligible expenses you might not have thought of.
How is a Health Spending Account set up?
We've talked before about how easy it is to set up an HSA, and the freedom plan sponsors have to make contributions that fit their business and control their costs. One of the key concepts you may remember is that HSA contributions are tax-deductible for the plan sponsor and tax-free for the plan member. That means that the business setting up the HSA can account for what they spend as a tax deduction. The plan member using the funds doesn't have to pay income tax on this part of their compensation.
Because of this amazing tax treatment, the Canada Revenue Agency (CRA) has limitations on what HSA funds can be used for. In short, HSAs can only be used to reimburse expenses that are eligible under the Medical Expense Tax Credit.
Which expenses can be reimbursed using an HSA?
The list is long! Let's start with the basic guidelines. An expense may be eligible for reimbursement if:
- The plan member paid for it;
- It was for the plan member or their dependant; and
- It is a CRA eligible medical expense.
Within those guidelines, almost anything that is medically necessary fits the bill. The CRA has a searchable list which is super helpful to find out if an expense is eligible and any documentation needed to prove that it was medically necessary.
What isn't covered by an HSA?
Thankfully, this is a much shorter list!
Generally speaking, anything that is cosmetic, over-the-counter, or a lifestyle expense is not eligible. However, with a Wellness Spending Account, lifestyle expenses are eligible. Read more on that here!
Cosmetic expenses
Cosmetic procedures are typically not medically necessary, so they're excluded from the list. Things like liposuction, botulinum injections, or hair replacement procedures are not eligible for reimbursement. The exception may be if the procedure is necessary for medical or reconstructive purposes.
Over the counter purchases
Medications, vitamins, and supplements, even if prescribed by a medical practitioner, are not eligible for reimbursement. These are considered over-the-counter purchases - things you could pick up without consulting a doctor. Organic food and birth control devices fall into this category as well.
Lifestyle expenses
Although we know that heading to the gym and tracking our fitness is good for our health, gym memberships, fitness trackers, and other lifestyle expenses aren't eligible for reimbursement using an HSA. They're not considered a medical expense.
If a plan sponsor wants to support health and wellness for their team by providing for these types of expenses they should look at our HSA Wellness. It's a different kind of spending account that provides funds to encourage healthy living.
These expenses may surprise you!
While everyone thinks of prescription drugs, massage, dental visits, or eyewear as something their benefits can pay for, few people know the full scope of what an HSA can cover. Because it's so flexible, an HSA also covers expenses like:
- Assistive devices - computer peripherals, teletypewriters, closed caption decoders, and more for people who need this kind of assistance.
- Travel expenses - if you had to travel more than 40km to receive medical care that wasn't available near your home, then vehicle expenses, meals, and accommodations may be eligible.
- Moving or renovation expenses - if you have mobility impairments and your home does not have the necessary accessibility features, you may be able to claim expenses to modify your home or move to a more appropriate one.
Seriously! Have a peek at the CRA website and you'll find lots more interesting expenses you can claim using your HSA. Let's see your traditional health and dental plan handle that!
Your HSA. Your Funds. Your Flexibility.
HSAs are the ultimate in flexibility. They can reimburse expenses an insured health and dental plan won't, and there are no limits on how plan members use the funds. This makes an HSA the perfect fit to meet the needs of a diverse team. Now that you're a master of all things HSA, check out some tips on how you should go about setting up a plan.
So, what are you waiting for? Get in touch to find out how an HSA can be part of your blended benefits plan!
