Why Have an HCSA?

Mar 09, 2015

A diversified work force brings with it many opportunities to enrich the workplace, but it also comes with the inherent challenge of managing employee needs that are just as diverse. One way to meet those needs is to add a Healthcare Spending Account (HCSA) to an existing benefits program. This option creates more flexibility while maintaining some degree of cost certainty.

An HCSA allows employees to be reimbursed for health-related expenses that aren’t covered by their plan, or to top up their existing extended health and dental coverage. Deposits to an HCSA can assist employees to pay for items that may include, but not limited to:

  • expenses not covered or have limits under group benefit plans, such as hearing aids, prescription glasses, crutch rentals or orthodontia
  • top up payment for paramedical services not fully covered by the benefits plan such as massage or physiotherapy
    pay deductibles or coinsurance amounts
  • expenses not limited to the benefits plan, but qualify under as a medical expense tax credit under the Income Tax Act

There are many advantages for both employees and employers to have an HCSA. For employees, it offers flexibility in a tax-free manner and control on how to use the fund allotment.

How employers benefit from having an HCSA is that it can be treated as business expense deduction and they have control on the budget by setting the fund allotment. Plus, an HCSA provides employers with control over claims costs each year because employees can only claim up to their individual maximums. Funds that are not used for claims within the specified time period remain the property of the employer and will be returned to them.

There are a few carryover options for the unused funds that CRA allows, but that’s a point for another discussion. For now, employers looking for creative ways to control their health and dental expenditures while creating some employee flexibility should consider an HCSA.

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