If you’re interested in maintaining employee satisfaction while effectively managing operating costs, a health spending account with flexible options is the perfect solution. Not only does it contribute to employee happiness, but it also offers tax advantages. Let us explain how this innovative concept, akin to a specialized savings account, works in practice:
First, your firm creates individual health spending accounts for each employee, with annual credits determined by your internal policy. There are no limitations on the amounts, except that they should align with relative remuneration.
Throughout the year, employees can utilize their credits to cover dental and medical expenses not covered by their group medical plan. This health spending account program can be integrated with an entry-level group insurance plan or offered as a standalone benefit option.
Benefits for Employers:
- Cost Smoothing: A health spending account acts as a capped benefit vehicle, reducing the risk of fluctuating overall claim rates and enabling accurate cost budgeting.
- Tax Efficiency: Disbursements from the health spending account, as well as administrative fees, are fully tax deductible.
Benefits for Employees:
- Flexibility of Choice: Health spending account credits can be utilized for any eligible medical or dental treatment, giving employees the freedom to choose the services that suit them best.
- Reduced Out-of-Pocket Spending: When combined with an entry-level group insurance plan, employees can use their account credits to:
- Cover deductibles for services covered by the group insurance plan.
- Pay for amounts exceeding the plan’s coverage limits.
- Access medical and dental care not covered by the group insurance plan, as long as they are recognized under the Income Tax Act.
Except for Revenue Québec, credited amounts in the health spending account are treated as non-taxable income by the government.
Could there be a more tax-effective way to enhance employee satisfaction while effectively managing costs? Contact us to learn how easy it is to implement a health spending account program at your firm.
We look forward to discussing the possibilities with you!