Not all Spending Accounts are Created Equal

We have written several blogs in this section of the HSA Easy Pay Ltd. website sharing details of how Spending Accounts fit into – or replace – your overall group benefit offering. We have detailed what an Health Spending Account HSA is. Why your employees are clamouring for Wellness Spending Accounts (WSAs). Methods of ensuring a successful roll-out of your spending account.  But, not all spending accounts are the same. In fact, you can get confused by the sheer number of acronyms in our field.  

What is a Spending Account? What is the difference between a HSA and a WSA? What is a Flexible Spending Account (FSA)? Is that the same as a Lifestyle Saving Account (LSA) or a Taxable Saving Account (TSA)? Today, we tap into the spending account vernacular and cut through the confusion. 

In the simplest terms, a spending account is a pre-determined amount of money allocated to employees each year to spend on certain types of expenses. These typically are health-centric but trends continue to scale increasingly higher in wellness oriented spending buckets. Spending accounts are simple to set up, simple to maintain and provide extreme value to employees. They are an excellent tool for attracting and maintaining employees at all levels of employment from new hires to tenured to those approaching retirement.  

From this, you define which expenses are eligible for reimbursement and the amount of money to place in the spending accounts for their employees each year. According to the 2020 Sanofi Report on Healthcare in Canada, 57% of benefits providers now include some form of spending account as part of their group benefits plan. This is up from 31% in 2017. It is clear that employee spending accounts have become the norm as a means of supplementing benefits plans. 

Types of Spending Accounts 

There are various types of spending accounts that all work a bit differently from one another. In general, they break down into either taxable benefits or non-taxable benefits (or a hybrid). Below are the most common spending accounts in Canada: 

HSA 

A Health Spending Account is provided to your employees as a supplement or alternative to a full-fledged group benefits plan. Sometimes HSAs are referred to as a Healthcare Spending Account (HCSA) or Private Health Spending Plan (PHSP). An HSA provides a non-taxable alternative or supplementation to a traditional benefits plan. HSA eligible expenses are vast, ranging from dental, vision, professional services, & hospital bills. HSA’s are a Canada Revenue Agency (CRA) approved method to provide medical, dental, and vision benefits in a tax efficient manner. An HSA is an approved business expense for the employer and is non-taxable for the employee. A corporation can write off 100% of the costs related to its HSA and all expenses are non-taxable for the employees. Use HSA’s to carve out coverage for your employees such as  

  • Orthodontics 
  • Physiotherapy 
  • Vision care 
  • Massage 
  • Pharmaceuticals 
  • …and so much more 

Employees can use HSAs can use HSAs to cover expenses beyond plan maximums or expenses relating to co-insurance or deductibles. The Canada Revenue Agency defines what expenses are eligible, and eligible expenses paid through an HSA are made tax free to employees. What’s more, employers can deduct their employees’ eligible HSA expenditures as a business expense. 

WSA 

WSAs are a taxable employee benefit that is employer funded empowering employees to make purchases of their choosing within the over-arching wellness category. This could include:

  • Fitness (gym memberships, exercise equipment, gym clothing etc.) 
  • Nutrition & Over the counter supplements 
  • Childcare services 
  • Personal development (including courses and textbooks) 
  • Mental health and therapy 

An HSA – sometimes referred to as a Taxable Spending Account (TSA) or a Lifestyle Spending Account (LSA) – covers certain health related products and services that are outside the scope of an HSA. Also attributable to a WSA is the fact that funds and accepted categories are allocated by you, the employer. WSAs act as an incredibly flexible perk for employees providing financial coverage for expenses that they would normally need to personally pay out of pocket for. 

FSA 

A Flexible Spending Account (FSA) takes elements of both health and wellness spending accounts to include them in one benefits pool for your employees. This lets your employee choose how much of their amalgamated spending allocation they would like to be used for wellness and for health expenses. Depending on the benefits provider, it could be as easy as tracking expenses in an App like HSA Easy Pay allows. The same tax implications mentioned above still hold true. Health spending is non-taxed. WSA expenses are taxed.  

Your Health and Wellness Insights 

Health spending accounts can cover a wide range of routine and costly medical expenses while simultaneously providing an array of benefits. While answering these top eight frequently asked questions, HSA Group has created a FAQ Page with more answers to related to your HSA questions. 

Contact HSA Group today if you’re: 

  • An Advisor wanting to add a lower margin HSA to your benefits offering, or 
  • An Employer wanting to improve employee satisfaction and engagement, or 
  • An Employee wanting to save money now and at tax time.