Frequently asked questions related to Health Spending Accounts

What is the spending limit for an HSA?

Spending limits in the HSA is set by the employer, ranging from a minimum of $500 to a maximum of $15,000 per employee. Limits vary based on job classifications, with each group getting a different limit. While there's no strict rule, it's important to keep these limits fair and reasonable. A good practice is to have a maximum difference of 10 times between the highest and lowest limits among employees and employers (i.e. 10:1).

Is it Necessary to Include All Employees in the HSA?

It's not mandatory to include every employee, but fairness is key. The plan shouldn't just cover shareholders, as this goes against Canada Revenue Agency (CRA) rules for HSAs. It might look more like a benefit for shareholders rather than for employees. So, it's advisable to include at least a portion of your non-shareholder employees to comply with these guidelines.

How Much Should I Allocate for Each Employee's HSA?

As a business owner, the amount you offer your employees is your choice. A common starting point is about $1,000 for each employee at the basic level. Remember, there's no one-size-fits-all amount. You can adjust the budget to suit your plan. After a year, you can review and adjust for future allocations. Best practice is to start small - as it is always easier to offer employees more benefits than it is to take benefits away.

Can I get an HSA?

Yes, you can get an HSA if you:

  1. Run an active business that's incorporated.
  2. Have healthcare costs.
  3. Earn some income reported on a T4 slip.
Does it mean I'm paying for medical expenses two times?

In a way, yes - however it is temporary.

  1. First, you pay for the medical expense personally out of your pocket.
  2. Then, your corporation pays the same amount to your health spending account provider to process the claim for this expense.
  3. Once the claim is processed, your health spending account provider then reimburses you (personally) fully.

So, while it seems like you pay twice, your corporation benefits from a tax deduction and you are reimbursed (personally) tax-free.

Still have questions?

Please contact our office and we'll be happy to address any questions you may have.

Subscribe to our newsletter

Stay Informed with the Latest Insights and Updates

By clicking Sign Up you're confirming that you agree with our Terms and Conditions.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.