Health Spending Account Definitions [Glossary of Terms]
The Glossary of Terms is here to provide you with clear definitions for all of the financial jargon you will encounter around the topic of Health Spending Accounts (HSA). We know that financial terminology can be daunting, yet very important to understand, so we have developed this compilation to help you navigate this subject with clarity.
[This resource was last reviewed and updated on: November 29, 2018]
Health Spending Account (HSA)
Also described as a Private Health Services Plan (PHSP). The Health Spending Account (HSA) is an employee benefit that provides reimbursement for health-related expenses, over and above regular insurance plans. Health Spending Accounts are administered in agreement with Canada Revenue Agency guidelines. [Frequently Asked Questions about an HSA]
Eligible Expense
Eligible expenses for a Health Spending Account are determined by the same requirements and guidelines outlined in the Medical Expense Tax Credit guide by the [Canadian Revenue Agency].
Plan
The plan is a Private Health Services Plan (PHSP) more commonly referred to as an employee health care plan or Health Spending Account (HSA).
Benefit Coordinator
This is generally an Executive, Human Resources member, Payroll Administrator or Bookkeeper for a company. The Benefit Coordinator advises Olympia Benefits of changes within the plan.
Plan Year
The plan year is the date referred to in the Plan Summary. It marks the specific annual life-cycle dates specific to the plan.
Effective Date
The effective date is the date the plan officially commences.
Service Date
All claimed expenses are based upon the date that the service or prescription occurred, not by the date the payment was made. If benefits have been exhausted in a plan year, the receipt cannot be carried forward into the next plan year.
Rollover of Benefits
The employee's unused portion of the fixed dollar amount that was allocated to them, that will be carried forward into the next plan year. The carried forward amount must be utilized within 12 months.
Forfeit or Reset of Benefits
The unused portion of the established fixed dollar amount assigned to the employee, which will not be carried forward into the next plan year.
Pro-rated Benefits
The established fixed dollar amount that is proportionately distributed by the months the employee is eligible on the plan. This is applicable to the first plan year only.
Monthly Benefit
The established annual benefits that are distributed to the employee in twelve equal allotments and accumulate monthly. If benefits are allocated on a monthly basis you have two options: 1. Send in your eligible receipts after enough benefits have accrued to pay out the entire claim or 2. Send in your eligible receipts and we will diarize the claim and pay you out monthly as your benefits accrue to the maximum allowable.
Dependents
Dependents are defined as your legal spouse and unmarried, unemployed dependent children including natural, adopted or step-children. Children of a common-law spouse may be covered if they are living with the employee.
- a) A spouse of an eligible Employee who is either:
- legally married to the Employee; or
- a person who is living with the Employee and who is publicly represented as the Employee’s spouse or partner; and
- b) Any financially dependent member of the Employee’s household with whom the Employee is connected by blood relationship, marriage or adoption.
Common-law Partner
This applies to a person who is not your spouse, with whom you are living and share a conjugal relationship, for at least 12 continuous months.
Cheque Reimbursement Fee
The fee charged directly to each claimant for the cost of producing and mailing a cheque for each claim processed. The fee is deducted directly from the amount of the claim reimbursement. There is no fee if direct deposit is in place.
Before Tax Dollar
Refers to an amount of money (personal income) before taxes are deducted. If you earn $10.00 and your marginal tax rate is 35%, you will have $6.50 after tax. In this case, a before tax dollar refers to the amount of $10 before any tax is deducted.
After Tax Dollar
Refers to an amount of money (personal income) after taxes are deducted. If you earn $10.00 and your marginal tax rate is 35%, you will have $6.50 after tax. In this case, an after tax dollar refers to the amount of $6.50 that you get to keep after tax is deducted.
Employee Benefits
Various types of non-wage compensation provided to employees in addition to their normal wages or salaries. In most countries, most kinds of employee benefits are taxable to at least some degree. [Wikipedia]. A Health Spending Account is one of the few benefits that is tax-free to both the employer and employee.
Administrative fee
This is the percentage charged to the company by Olympia Benefits Inc. on the eligible amount to be reimbursed on a claim. Administrative fees are not charged to the employee. Administrative fees are tax deductible to the company.
Insurance
An arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium. [Oxford Dictionary]
Arms-length
The description of an agreement made by two parties freely and independently of each other, and without some special relationship, such as being a relative, having another deal on the side or one party having complete control of the other... [Source: Legal Dictionary]
Taxable income
The amount of income you have to pay tax on, after tax credits and deductions. [Source: Ontario Securities Commission]
Small and medium sized businesses across Canada use Health Spending Account's as an alternative option to traditional health insurance plans. This type of account offers incorporated companies the advantage of cost-control and flexible benefits without escalating premiums.
If you would like to learn more about HSA's, download the free guide below.
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