|
About Health Care Spending Accounts
Health Care Spending Accounts (HCSA) are
gaining considerable popularity within the benefit industry.
It is a tax-effective approach where an employee can use pre-tax
dollars to offset the costs of deductibles, co-payment
amounts and other expenses not considered eligible by
traditional programs.
Employers find implementation of an HCSA
program an effective method of offsetting the affect or
reaction to cost-cutting plan changes. For example, if the
employer implements a deductible, eliminates a benefit, or
introduces a co-payment, in an effort to reduce the increasing
costs to the plan, an HCSA program can be implemented. The
employer may now assign a fixed annual dollar entitlement and
employees then decide how they wish to apply those benefit
dollars to suit their own specific needs.
Examples of Eligible Expenses
The HCSA benefit may be used to reimburse for such items as:
- deductibles and coinsurance of traditional plan
benefits
- elective surgeries
- orthodontia, dentures and dental procedures
- laser eye surgery
- MRI, CT scans and cardiographs
- services from medical practitioners or hospitals
- eye glasses
- products required because of incontinence
- bone marrow or organ transplants
- drugs or medicaments that are prescribed by
a medical practitioner or dentist and recorded by a pharmacist, used in the
diagnosis, treatment or prevention of a disease or disorder;
or
- in vitro fertilization procedures.
For a complete list of eligible expenses, see the Canada Revenue Agency web
site.
Premiums paid to another private health services plan, such as
for emergency travel insurance, may be reimbursed through the
HCSA. Medical Services Plan of BC (MSP) premiums are not
eligible.
Employer Advantages
As employers determine the amount to be allocated to the HCSA,
there are no surprises with respect to hidden benefit costs.
Employers are able to budget such costs and the financial
commitment is defined upfront. Contributions are a
tax-deductible expense to the Employer.
Employers have more
flexibility in plan design guidelines. These plans can be used
to replace or supplement existing benefit plans.
Employee Advantages
Employees are pleased with the added flexibility of being able
to direct their benefit dollars to meet their individual
health care needs. For example, an employee who does not wear
glasses, gains no value from a Vision Care benefit. However,
if those dollars are allocated to an HCSA, they can be applied
to expenses that are meaningful to that particular employee,
such as vaccines or annual deductibles. All
reimbursed claims are non-taxable.
Eligibility
An HCSA covers the plan member, spouse, and dependents. A
dependent includes any person for whom the plan member could
have otherwise claimed a medical expense tax credit under the
Income Tax Act.
Employees may submit medical expenses on behalf of a dependent
not covered under their regular plan, such as a dependent
parent.
Terminated employees have 31 days to submit any claims to
their HCSA, provided the expenses were incurred while they
were employed and eligible.
HSCA Criteria
In establishing an HCSA program, an employer must consider the
following:
- The annual HCSA entitlement, and whether funds will be
contributed annually, or quarterly.
- Whether the HCSA plan is to have a one-year roll-over or
forfeiture feature to dispose of unused account balances at
the end of the year.
- Plans can either include a one-year rollover of unused
balances or a one-year roll-over of unclaimed expenses.
Roll-over of unused balances allows unclaimed funds
contributed during one calendar year, to be carried into the
next calendar year to be applied to current calendar year
expenses. For example, if the entitlement is $300 per year,
and at the end of the year, there is an unclaimed balance of
$100, this $100 could be carried into the next calendar year.
The account balance into the new calendar year would therefore
be $400.
The alternative allocates one fixed entitlement per year, but
allows expenses to be carried into the next calendar year for
continued reimbursement. In this situation, any remaining
unclaimed funds in the accounts are forfeited to the Plan, at
the end of each year. For example, if the entitlement is $300
per year and a claim for $450 is submitted, the claim would be
paid with the available funds from the incurred year's
entitlement and then carried into the new year for further
reimbursement using the new year's entitlement.
Canada Customs and Revenue Agency (CCRA) prohibits plans from
including both roll-over approaches. The same approach must
apply to all employees within the Plan.
For More Information
To receive more information on this benefit, or to coordinate
an HCSA arrangement, please contact the Marketing Department
at D.A. Townley & Associates Ltd. at:
Suite 101—4190 Lougheed Highway
Burnaby, BC V5C 6A8
Telephone: 604-299-7482
Toll Free: 1-800-663-1356
Facsimile: 604-299-8136
Email
|
|
PDF
- 20 Kb)