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An explanation of taxes on insurance premiums in relation to HSAs

Posted by K. Fry on July 20, 2017
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In the past, Health Spending Account claims were exempt from taxes.  Most provincial governments still do not tax Health Spending Account Claims but Ontario and recently, Saskatchewan, now apply unique provincial taxes to the product. 

Saskatchewan PST on Insurance Premiums

As per the budget on March 22, 2017, the Saskatchewan government will begin applying a 6% PST to "insurance premiums".   On August 1, 2017, all enrollment, membership, and administration fees are will be charged an additional 6% PST in addition to 5% GST.  Medical claim totals will also be charged 6% PST.

Example for setting up a new plan, and a $1,000 claim

1. Example for Olympia HSA Basic

Membership Fee: $249 + 6% PST + 5% GST or $27.39

 

Claim Total: + 6% PST or $60

$60 will be added to the claim total.

 

2. Example for Olympia HSA PLUS

Membership Fee: $499 

Claim Total: + 6% PST or $60

$60 will be added to the claim total.

 

3. Example for Olympia HSA Group

Enrollment Fee with 5 employees: [$335 + ($40 x 5)] + 6% PST + 5% GST

PST and GST Total: $58.85

 

[A] Claim: $1,000

[B] Olympia 8% administration fee: $80

[C] Subtotal: $1,080

[D] 5% GST on [B:] $4

[E] 6% PST on [C]: $64.80

[F] A+B+D+E = $1,148.80

 

Ontario PST, RST, HST and Health Spending Accounts

The Ontario government has its own unique tax treatment of "insurance premiums" and Health Spending Accounts.  There is a 2% special Premium tax and 8% RST on the claimed amount.  A 13% HST is also charged on the administration fee amount.

 

Example of $1,000 claim

1. HSA PLUS / Basic

Premium tax: 2% or $20

RST: 8% or $80

No HST as there is no administration fee

Total: $1,100

 

2. HSA Group

[A] Claim: $1,000

[B] Olympia 8% administration fee: $80

[C] Subtotal: $1,080

[D] 2% Premium Tax on [C:] $21.60

[E] 13% HST on [B]: $10.40

[F] 8% RST on [A]: $80

[F] A+B+D+E = F = $1,192.00 

BC, Alberta, and Manitoba do not have the additional taxes on claims.

Try using our savings calculator to determine how much your business will save with a Health Spending Account.