Health Spending Account Classifications: 5 Things Employers Need to Know

A Health Spending Account (HSA) is a cost-effective and flexible way to provide employee benefits. You can customize an HSA plan through classifications, which allow employers to set different spending limits for different groups of employees. Below are 5 things to know about HSA classifications before opening your plan.

What is a Health Spending Account classification?

Classifications are a way to group your employees within your HSA plan. They’re commonly created based on factors such as:

• Position
• Seniority
• Tenure
• Employment status

How does an HSA classification work?

When setting up an HSA, employers assign a spending limit to each classification.

As an example, one company might have the following classifications:

In this case, each full-time employee could claim up to $3,000 in eligible medical expenses each year.

How much should employees receive through an HSA?

There is no one-size-fits-all approach to HSA classifications. Deciding on appropriate spending limits for your employee classifications depends on:

As a general guideline, the highest classification should be no more than 10 times the lowest classification. If your highest classification has a spending limit of $10,000, then your lowest classification cannot receive less than $1,000.

How to Build an HSA Budget for Your Team

As an example, let’s say Company A has 5 employees, and structures its HSA with the following classifications:

Total annual spending limit: $17,000

Assuming an administration fee of 8% on claims:

Total annual HSA budget = $18,360

$18,360 is the maximum annual cost for Company A with this plan design. The actual cost of an HSA is often much lower, as employees typically claim only 66% of their HSA funds on average according to the 2025 Benefits Canada Healthcare Survey. Every unused dollar stays with your business.

How are HSA claims reimbursed?

Employee claims are reimbursed by the HSA provider to the employees’ personal bank accounts, using funds in the employer’s claims funding account.

To ensure that your employees are reimbursed as quickly as possible, we recommend depositing 20% of your total annual HSA budget into your claims funding account. For Company A, this would be about $3,700.

How does monthly funding for an HSA work?

After the initial deposit, employers typically replenish their claims funding account monthly.

Most HSA providers offer pre-authorized withdrawals that automatically transfer funds from the employer's bank account into your claims funding account.

This allows employers to:

• Spread the cost throughout the year
• Maintain cash flow flexibility
• Ensure claims are paid promptly
• Reduce administrative work

The monthly contribution amount can be customized based on the employer's budget and anticipated claim activity.

FAQs

Do all employees need to have the same HSA limit?

No. Employers can establish different classifications and assign unique spending limits to each group.

Can HSA limits be changed?

Yes. Employers can review and update classification limits when renewing or modifying their plan.

Can unused HSA credits roll over?

Many HSA providers offer rollover options. The specific rules depend on the plan design selected by the employer.

What are the main benefits of having employee classifications?

Classifications allow employers to customize benefits while controlling costs and maintaining predictable annual budgets.