Implementing a Health Spending Account

Step #1 - Design Your Contribution Formula

Designing a contribution formula that allocates your benefit budget according to your compensation strategy is critical to achieving the results you want from your benefit program. You have a great deal of latitude in designing a contribution schedule that specifically meets the needs of your organization. The contribution schedule may vary by occupation or seniority, can be expressed as a specific dollar amount or percentage of earnings and may be adjusted at the beginning of each calendar year. A provincial worksheet is available to help you customize the contribution schedule to suit the compensation structure of your organization. A national worksheet shows the taxes for each province.

Most employers make contributions on the first of every month but some contribute quarterly or annually. Tax regulations require that the contribution amount and frequency be established annually and remain unchanged during the plan year.

Step #2 - Select Your Administrator

Professional administration of your health spending account frees you to focus on your core business, limits your liability for violating tax regulations, and from accusations of using employee medical information inappropriately. Administration fees depend on the size of the group and can be a combination of variable and fixed transactions costs. Variable fees on cash-flow (either contributions or claims processed) range from 10% to 15%. Some administrators also charge fixed costs to process each claim, issue each cheque, setup the plan, renew the plan annually, and terminate the plan.

For over 20 years Benefits Interface has administered health spending accounts for clients using a simple 10% of contribution pricing method (see application). As a full service benefits broker, we can also help setup coverage with another administrator.

Please let me know if you would like assistance,