Health Care Spending Accounts



Health Spending Accounts (HSAs) are a tax-effective way to offer choice and flexibility to a group benefits plan. They cover a wider range of expenses and dependents than regular health and dental benefits, and can, therefore, enhance a plan’s ability to meet diverse employee needs. As well, the ‘defined contribution’ nature of HSA funding means that plan sponsors can predict and manage the cost of these benefits from year to year.

Added to a group benefits plan, HSAs are designed to supplement the coverage provided under insured Health and Dental benefits. The plan sponsor (employer) allocates funds, called ‘credits’ into each employee’s account and the employees can then claim against these credits to pay for a wide variety of health and dental expenses not covered under the insured plans.

Similar to Health and Dental benefits, an HSA is not considered a taxable benefit as long as it meets federal income tax guidelines. The HSA can, therefore, provide more spending power than a cash award.

The HSA covers a wide range of medical and dental services. It can be used to claim the portion of the health or dental care expenses that are not covered by the insured health or dental benefits, including deductibles or amounts that are over the plan maximums, as well as products and services not available under the insured plans. If an expense qualifies as a medical expense under the Federal Income Tax Act, it qualifies for payment from the HSA.