Many companies in Calgary offer either Health Spending Accounts (HSA) or Wellness Spending Accounts (WSA) as part of their group health insurance plans for their employees. But where do they differ for employees and employers? In this guide, we’re going to explain what you need to know about these spending accounts and how they might benefit your business and your employees.
What is a Wellness Spending Account (WSA)?
A Wellness Spending Account (WSA) is similar to a Health Spending Account in which it covers expenses – but only concerning wellness and health services, as opposed to medical services.
It encourages employees to undertake healthy activities; with health plans more focused on fitness, nutrition, over-the-counter supplements, personal development, courses and textbooks, mental health and therapy.
However, unlike an HSA, a WSA is a taxable benefit, which means that the amount used by the employee’s allowance contributes to their yearly taxable income. It is not tax-free and, therefore, eligible services and items are determined by the insurance provider.
What is a Health Spending Account (HSA)?
HSAs are more common than WSAs because group health insurance plans cover medical services that impact the health of employees. It’s why the majority of services under an HSA include dental insurance, prescription drugs, physiotherapy, and prescription glasses.
The main difference with an HSA is that it’s a tax-free allowance. All expenses are 100% tax-deductible for businesses, and employees do not pay tax on their purchases. Therefore, the eligibility works differently: the Canadian Revenue Agency determines the eligible medical expenses, not the insurance provider, due to its tax implications.
How do they Work for Employees?
Both HSAs and WSAs work on a similar level:
- Each employee is designated a limit as to how much they can spend in their health spending account. Limits are determined through classifications (such as job title, years of experience and anything applicable in the workplace) by the employer.
- Employees will pay for the expense personally and then claim with the WSA/HSA provider, and if eligible, they will be reimbursed.
- Employees do not have to spend all of their WSA/HSA allowances but cannot claim over their limit.
The significant difference between the two is that the allowance used in the WSA is added to an employee’s taxable salary, as opposed to an HSA, which is tax-free dollars. When the reimbursement of the WSA takes place, the expense will be added to the employee’s total taxable income.
There are many advantages to using either health spending account. For employers:
- They can control costs
- The chance to attract, retain, or develop employees
- Offer highly specialized, industry-specific perks
- Avoid high admin fees and premium increases
For employees, they can expect:
- The flexibility and choice for employees to use their health spending
- Incentivize their employees to take a proactive approach to their wellbeing, meaning reduced days of work, higher productivity and a happier workforce
- The opportunity to save money in health and wellness expenses
How to Choose what Works for Your Business?
Choosing one over the other for your employees depends on your business objectives, the workplace culture you’re trying to promote and your budget. Start by asking yourself:
- What is the aim of my business?
- Is there an example I want to set for my employees
- What is my budget?
- What type of work environment am I trying to create?
Take your time and think about making the right decision on which health spending account works for you.
Perlinger Group Benefits has been offering exceptional group benefit plans since 1992. Our goal is to provide the best group health insurance plans to meet your business’ needs, regardless of the size of your business. We make it affordable and easy to get access to comprehensive benefits plans. Contact us today: Direct Line 403-217-5560 | Toll-Free 1-877-217-7829 | Email [email protected].
