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Employee spending accounts, such as HSAs and FSAs, are a popular issue in employee pay. Employers are becoming more aware of employee spending accounts due to two recent changes. To begin with, today's workforce has grown to demand health insurance as part of their complete remuneration package. Younger generations, in particular, demand a greater variety and flexibility in the health benefits available to them. Second, healthcare expenses are growing, making it more difficult for businesses to maintain comprehensive benefits. In this tutorial, let's look at the various types of spending accounts and how they might benefit your company and employees. A benefits consulting Canada service like ourselves, can help you get on the right track.
Flexible Spending Account (FSA)
A Flexible Spending Account combines taxable and tax-free health and wellness benefits. Flexible Spending Accounts (FSAs) may only be funded by an employer in Canada. The fundamental benefit of a FSA is that it mixes qualified costs from both tax-free HSAs and taxable WSAs to provide workers maximum flexibility. Employers can establish a menu of taxable and non-taxable perks to offer their employees through an FSA. A set number of credits are then distributed to each worker. Employees assign their preferred quantity of credits toward the perks they value most at the start of the year and can use those credits at any time during the year. If employees have already assigned the credits, they will not be able to make adjustments until the following year.
Health Savings Account (HSA)
A Health Savings Account (HSA) is available solely to participants of the Federal Employees Health Benefits (FEHB) Program who are enrolled in a High Deductible Health Plan (HDHP). A percentage of your HDHP premium is credited to your HSA. Your HSA will be set up by the health plan, and you will get account details in the mail. You can also contribute to the account before taxes are deducted. To contribute to your HSA on your own, you'll need the account information supplied to you by your health plan. You must enter the dollar amount you want to give each pay cycle. Your HSA savings cover your deductible and/or eligible medical costs that are not counted towards your deductible. These accounts pay interest and carry any unpaid debt from year to year. Whether you change your mind, quit Federal service, or retire, the monies are yours to keep. Non-medical costs can also be paid with withdrawals. However, it will be subject to income tax and a 10% tax penalty if you are under the age of 65.
Wellness Savings Account (WSA)
A taxable benefit is a Wellness Spending Account (WSA). This implies that the amount utilized in an employee's WSA allowance is deducted from their taxable income each year. Unused WSA funds are not added to an employee's taxable income. The Canadian Revenue Agency does not control the allowable costs of WSAs since they are not tax-free benefits (CRA). Each WSA provider creates its own list of WSA charges that are qualified. Alternatively, the provider might collaborate with plan sponsors (employers) to determine covered charges. An HSA is an employer-sponsored benefit plan that provides workers with tax-free funds to spend on CRA-eligible costs. Employers assign classes to each employee within certain parameters. This can be based on various characteristics such as job title, age, years of experience, or anything else. Employees pay for medical expenditures out of pocket and then submit a claim to the HSA for reimbursement. If the employee qualifies, their yearly HSA allowance is used to repay them. Employees can't go over their HSA limit, but they don't have to spend it. As a result, companies have more control over the amount of money on health benefits each year.
Advantages a HSA
- Cost control and customization for employers
- Predictable or constant costs
- Smooth policies
- No sunken costs
- Tax-free allowance for employees
Advantages of WSA
- No premiums
- Flexibility and choice for employees
- Cost control and customization for employers
- Attract and retain top talent
- Healthy lifestyles for employees
- An additional incentive for the healthcare of employees
- Differentiation in packages
Advantages of FSA
- Truly flexible
- Useful for diverse employee demographics
- Great way to impress the employee
- Flexible to the employee's needs
- Unique for all health and wellness needs
- Tax benefits while
- Tailored wellness perks
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