Health Spending Accounts (HSA) vs Wellness Spending Accounts (WSA): A Guide for Canadian Businesses

If you're a Canadian business owner, you may have heard about Health Spending Accounts (HSAs). You may also have heard about Wellness Spending Accounts (WSA). What you might not know is that combining these two accounts can create a more complete benefits package for your team while keeping costs predictable.

This guide explains the difference between Health Spending Accounts (HSAs) and Wellness Spending Accounts (WSAs), and how these two benefits can complement each other.

Key Takeaways: The Differences Between Wellness and Health Spending Accounts

• An HSA covers CRA-approved medical expenses like dental work, prescription medications, and physiotherapy, and reimbursements are 100% tax-free.
• A WSA funds wellness expenses such as gym memberships, fitness equipment, and continuing education, but reimbursements are taxable income.
• Pairing an HSA and a WSA together gives employees flexibility to address both medical needs and wellness needs without paying premiums, deductibles, or copays.
• Clear communication with your team about what each account covers ensure employees get the most value from their combined benefits.

What is a Health Spending Account?

A Health Spending Account is an employer-funded benefit that reimburses employees for eligible medical expenses.

A key advantage of an HSA is that the reimbursements are 100% tax-free for employees and 100% tax-deductible for your corporation. There are no premiums, no copayments, and no deductibles. You simply set an annual spending limit for your employees, and they submit claims when they incur eligible expenses.

For incorporated business owners without arm's length employees, an HSA covers you and your dependents. For businesses with employees, an HSA Group plan lets you set different annual limits based on employee classifications like managers, full-time staff, or part-time workers. For example, you could set a $500 limit for part-time employees, $1000 for full-time employees, and $1500 for managers.

HSA-Eligible Expenses

The CRA determines which expenses can be claimed through an HSA. Common claims include dental work, prescription drugs, physiotherapy, vision care, and prescription glasses. See a full list of eligible HSA expenses here.

What is a Wellness Spending Account?

A Wellness Spending Account (WSA) goes beyond traditional health and dental coverage to support overall employee wellbeing. While an HSA handles prescriptions and dental visits, a WSA covers lifestyle expenses that contribute to physical and mental health.

WSA-Eligible Expenses

Common WSA-eligible expenses include gym memberships, fitness classes, sports equipment, art classes, retreats, continuing education courses, and nutrition counselling. Eligible WSA expenses are determined by the provider and can vary. Click here for a list of eligible expenses through an Olympia Benefits WSA.

What's the Difference Between an HSA and a WSA?

The main difference between an HSA and a WSA is the purpose. HSAs are used for health and dental expenses, such as prescription medications, physiotherapy, and orthodontics. WSAs are used for expenses that support broader wellbeing, such as gym memberships, sports equipment, and continuing education classes.

Tax Treatment: HSA vs WSA

Another critical difference between HSAs and WSAs is tax treatment. Unlike HSAs, WSA reimbursements are added to an employee's taxable income. This means employees pay income taxes on the amounts they claim. Despite this, WSAs are a valuable benefit because they give your team the flexibility to invest in wellness expenses that aren't covered by traditional health benefits.

The Benefits of Offering Both an HSA and a WSA

Combining an HSA with a WSA creates a benefits package that addresses both immediate medical needs and long-term employee wellness. This is an effective option for Canadian businesses who want a competitive benefits package without the unpredictable costs of traditional group insurance.

An HSA covers essentials like dental checkups, prescriptions, physiotherapy, and more. A WSA fills the gaps by covering gym memberships, fitness equipment, and nutrition counselling. Together, they show employees that you care about their complete wellbeing.

HSAs and WSAs both provide cost control, too. You decide how much to allocate to each employee or classification. You only pay the claims that employees submit, plus a small administration fee. There are no surprise premium increases at renewal time.

How to Set Up a Combined HSA and WSA for Your Business

Setting up a Health Spending Account and Wellness Spending Account for your team can be done in a few straightforward steps. Olympia Benefits makes this process simple with online signup.

Step 1: Sign up for a Group HSA Online

To get started, open a Group Health Spending Account online. You'll be asked to enter a few details about your company and yourself, as the plan holder.

Step 2: Add a WSA Onto Your Plan

You can easily add a WSA onto your existing Group HSA plan with Olympia Benefits.

Step 3. Determine Employee Classifications

Next, identify how you want to group employees. You might create classifications based on roles (executives, managers, full-time, part-time), tenure, or another factor relevant to your business. Each classification will receive its own benefit limit.

Step 4: Set Benefit Amounts for Each Account

Decide how much to allocate to the HSA and WSA for each classification. For example, you might offer full-time employees $2,000 in HSA coverage and $500 in WSA coverage annually. The amounts should reflect your budget and what makes sense for your team's needs.

Step 5: Communicate the Plan to Employees

Explain how each account works, what expenses qualify, and the tax implications. Clear communication prevents confusion and helps your team get the most from their benefits.

Step 6: Let us Handle Claims and Administration

Once you've opened your plan, we'll handle the rest! Employees submit claims online or through our mobile app, and we typically process and reimburse each claim within two to three business days. As the employer, you fund the account monthly, and only pay for the claims that are submitted plus the administration fee. Any unused funds will be returned to you.

How Olympia Benefits Simplifies Employee Benefits

At Olympia Benefits, we've processed millions of claims for business owners and their employees. We specialize in HSA and WSA plans designed specifically for Canadian businesses.

You'll access your HSA and WSA from the same portal. Employees log in to view their balances and submit claims, and employers log in to manage classifications and funding.

There are no premiums, copayments, or deductibles with an HSA or WSA. You'll simply pay a $99 annual fee and an 8% admin fee on each claim. This structure means you only pay for what your employees use.

Questions to Ask Before Setting Up an HSA or WSA

Before setting up an HSA or WSA for your team, consider these questions:

• What medical and wellness needs do your employees have? Younger staff may value fitness benefits more, while employees with families may prioritize dental and vision coverage. Offering an HSA and WSA together gives them the flexibility to choose what they spend their balances on.
• What is your total benefits budget? Knowing your ceiling helps you allocate appropriately between HSA and WSA.
• How will you communicate the benefits package to your employees? Employees need to understand how to use their HSA/WSA, what expenses are eligible, and what the tax treatment is on each account type.
• How will you classify your employees? You can make classifications by tenure, position, or another factor that makes sense for your business.

Not sure where to start? Reach out to us and we'll be happy to help you design a plan that matches both your budget and your team's priorities.