What is a Health Spending Account?
A health spending account is a tax-free benefit budget that your employer gives you to help cover the drugs, dental, vision and other health expenses that you and your family need. It is the simplest way for a company to help employees with their health expenses. It recognizes that employees have unique health preferences by giving them the freedom to buy any health product and service permitted by the Income Tax Act. It also recognizes that resources are limited by providing each employee with their own benefit budget.
How does it work?
- Your employer makes monthly contributions to a health spending account for each employee.
- The health spending account is professionally administered to ensure your medical information is kept private.
- Whenever you mail in your receipt from a drug, dental, vision and medical purchase, you get reimbursed with the contributions in your health spending account, up to your annual budget.
- Your annual benefit budget is the total of last year’s contributions that were not used, plus this year’s contributions.
The health expenses of your immediate family, plus other family members as permitted by the Income Tax Act, are covered.
You can claim any medically necessary expense that is permitted by the Income Tax Act.
- Drugs prescribed by a doctor and dispensed by a pharmacist.
- Dental work including crowns, implants, braces and dentures.
- Glasses, contacts and laser eye surgery.
- Regulated health professionals such as chiropractors, massage therapists, physiotherapists, etc.
- Travel medical insurance, hospital, ambulance and other medical expenses.
How do I make claims?
Complete a simple claim form, attach your receipts, and mail it in. Any expense permitted by law will be approved. You will receive a cheque for your claim amount, up to the contribution balance in your health spending account. If your claim exceeds your account balance then you will receive what is in your account and then automatically receive an additional cheque each time a contribution is made to your health spending account during the calendar year, until the claim is fully paid.
Are there limits or exclusions?
You can claim any health expense that is permitted by the Income Tax Act. Your benefit budget limits how much you can claim each year. The contribution balance in your health spending account limits when you get reimbursed.
What if I spend more than my budget?
If at the end of the year you have submitted more receipts than can be reimbursed, then you will receive a tax receipt to claim a medical expense deduction when filing your income tax. The Income Tax Act does not allow receipts from one year to be reimbursed with contributions made during the following year.
What if I don’t use my budget?
Any contributions made during the year that are not paid out in claims are carried forward to the next year and become the opening balance of your health spending account; which increases your benefit budget for the next year. Since the Income Tax Act only permits contributions to be carried forward once, contributions that are not used by the end of the year following the year they were contributed are refunded to the employer.
Can I plan for large purchases?
If you’re planning for large dental expenses or laser eye surgery then you can build up a contribution balance by minimizing expenses.
What do employees like best?
You have the freedom to choose the health products and services that are important to you and your family. Your values don’t get questioned by an insurance company with exclusions and limitations.