Wellness Spending Accounts (WSAs) are a flexible employee benefit that allow Canadian employers to support their employees' overall wellbeing. WSAs are employer-funded and reimburse a wide range of wellness and lifestyle expenses that are not covered under a Health Spending Account. In this article, we'll cover the top 10 most frequently asked questions about WSAs, including what expenses are eligible and how it can improve employee engagement.
1. What is a Wellness Spending Account (WSA)?
A Wellness Spending Account (WSA), also referred to as a Lifestyle Spending Account (LSA), a Personal Spending Account (PSA), or a Health and Wellness Plan (HWP), is a taxable benefit offered by employers to employees to invest in wellness activities and services. Employers fund the benefit and reimburse employees for wellness eligible expenses.
WSAs are an added employee benefit to support employees' physical, mental, financial and emotional health. Employees have the flexibility to use their benefit allowance as they wish whether it's purchasing sports equipment, paying for music lessons or paying for professional membership fees.
2. How is a Health Spending Account (HSA) different from a Wellness Spending Account (WSA)?
Health Spending Accounts and Wellness Spending Accounts are employer-funded accounts that provide employees with a set amount of funds to use for the year.
HSAs are used to pay for medical expenses. Employees can choose which eligible medical expenses they want to spend their funds on and are reimbursed 100% tax-free until their annual balance is exhausted. HSAs do not have premiums, deductibles or copayments.
WSAs are used to pay for wellness related expenses. Employees can choose which wellness eligible expenses they want to spend their funds on such as sport equipment and art classes and are reimbursed until their annual balance is exhausted. Unlike HSAs, WSAs are a taxable benefit.
3. Why do employers offer Wellness Spending Accounts to employees?
WSAs help employers attract and retain talent while also improving employee retention. WSAs are employee-focused benefit that supports diverse employee needs while promoting overall wellbeing. Employees who feel supported are often more engaged at work, experience greater job satisfaction, and are more productive.
4. How does a Wellness Spending Account work?
A WSA is set up by the employer, who defines an annual spending limit for each employee or each classification of employee (e.g., full-time employees receive an annual WSA spending limit of $500 whereas part-time employees receive an annual WSA spending limit of $250).
Once a WSA is set up, employees can use their allowance to pay for items on the eligible expense list and submit a claim through their WSA provider. The WSA provider processes the claim and reimburses the employee for 100% of their expense directly to their bank account, up to their annual WSA limit. WSAs are a taxable benefit; therefore, funds used by an employee in their WSA account is taxed.
WSAs offer employers total cost-control. Employers set the annual limits for employees so that employers are aware of the maximum amount they will be funding for WSAs. Employers only need to pay for what employees claim; therefore, any unused funds are returned to the business.
5. Who are Wellness Spending Accounts for?
WSA eligibility varies from provider to provider, but typically any incorporated business with employees can sign up. Olympia Benefits offers a WSA as an optional add-on for any Group Health Spending (HSA) plan.
6. What expenses are covered by a Wellness Spending Account?
Wellness Spending Accounts cover expenses related to nutrition, fitness, professional/personal development, personal/family interest, and mental health. As eligible expenses are determined by the WSA provider, it's important for the employer to review the WSA eligible expense list to ensure it covers the expenses the organization wants to offer its employees.
Common expenses that are eligible through a WSA include:
- Vitamins and supplements
- Gym and fitness club memberships
- Fitness classes and lessons
- Marathon registration fees
- Professional membership fees
- Art classes and supplies
- Music lessons
- and more!
See a full list of eligible and ineligible expenses through an Olympia Benefits Wellness Spending Account here.
7. How much can an employer contribute to a Wellness Spending Account?
WSAs offer employers total cost-control. Employers set annual limits for employees, either for each employee or per classification (e.g., full-time employees receive an annual WSA spending limit of $500 whereas part-time employees receive an annual WSA spending limit of $250). Employers always know the maximum amount they will be funding for WSAs. Employers only need to pay for what employees claim; therefore, any unused funds are returned to the business.
Olympia Benefits WSAs require a minimum allowance of $250 per employee with a maximum allowance of $15,000 per employee.
8. Are Wellness Spending Accounts taxable?
WSAs are a taxable benefit in Canada. The Canada Revenue Agency considers WSAs to be a personal expense since it is used for reimbursement of wellness and lifestyle expenses. The amount reimbursed through a WSA is added to an employee's taxable income and is reported on their T4.
9. How much does a Wellness Spending Account cost?
Employers have total control-control over the WSAs. Depending on how employers choose to customize the plan will determine the cost. The maximum annual cost is the total amount of their employees' annual spending allowances, plus any admin and setup fees that the WSA provider charges. Unused and residual allowances are returned to the employer.
10. How much does an Olympia Benefits Wellness Spending Account cost?
Olympia Benefits offers a WSA as an optional add-on for any Group Health Spending (HSA) plan for $99/year plus an 8% administration fee on claims.
Disclaimer: This content is provided for general informational purposes only and does not constitute financial, tax, legal, insurance, or medical advice. Olympia Benefits Inc. makes no representations or warranties, express or implied, regarding the completeness, accuracy, reliability, and suitability of the information contained herein. While reasonable efforts are made to ensure the information is current, the applicable laws, regulations, guidelines, and administrative practices may change from time to time, and may also vary based on individual circumstances. Readers should conduct their own research prior to opening a Wellness Spending Account.
