What happens to unused health care spending account money?

By: Updated: August 29, 2019


A Health Spending Account is a cost-effective way to provide health and dental benefits to your employees. However, some employees may not always spend the full amount allocated to them. Here's what happens to unused health care spending account money:

The money belongs to the plan owner.

The money inside of a health spending account belongs to the plan owner and can be withdrawn if unused.

Many people mistake a health spending account as a type of insurance. Insurance plans require recurring premium payments for coverage. These premiums are sunk costs and cannot be returned regardless of whether a claim was made.

Unlike health insurance…

The unused money in a Health Spending Account is never lost. This money belongs to the plan owner and can be withdrawn at any time. The plan owner is the one who opened the plan or signed up for it. This is the reason we refer to a Health Spending Account as a cost-effective alternative to insurance as you do not waste any money. Only the claimed amounts are paid out.

Withdraw the money or rollover

The plan owner designates money (limits) to the employees. The amounts renew every year. Unused funds from the previous year can either go back to the plan owner or rollover for the employee. The choice is up to the plan owner when designing the plan. 

What is a rollover?

A rollover means the unused money is “rolled over” into the next year, on top of the new balance. Here is an example of a rollover in effect:

Example of a rollover

Health Spending Account - Year 1:

Employee Allowance - $1000

Amount claimed by employee - $500

Rollover amount of unused funds - $500

Health Spending Account - Year 2:

Employee Allowance - $1000

+ unused funds from Year 1: $500

Total Allowance Year 2 = $1500

In Year 3, any unused funds from the first year are removed from the employee spending limit and returned to the plan owner. 2nd year funds are rolled over into the third year. This cycle continues.

Why can’t funds rollover forever?

Health Spending Accounts are a derivative of a Private Health Services Plan (PHSP). According to IT339R2, a Private Health Services Plan must satisfy an element of risk in order to operate. A Health Spending Account upholds this element of risk through its plan structure.  Specifically, the requirement for risk is satisfied through the usage of a defined limit with a maximum roll over period of one plan year. Employees cannot be certain of how much and when they will make a claim. Therefore, the requirement for annual limits to be spent within a specific time period presents an element of risk. 

How does the plan compare for a single person business?

A single person business means the owner of the business is also the sole employee (or has their spouse as an employee too). The plan owner and employee are one and the same. As a result, the plan owner no longer has to pre-designate money to the employee. Instead, the employee can claim and fund as they go. However, there is a default limit set by Olympia on how much can be claimed. There are no rollovers in this situation.

Olympia’s Health Spending Account plans are designed as a “pay as you go” system for the single incorporated business owner. This means that they do not have to hold any funds within the account. The plan owner only pays after making a claim.

All our plans are digital, meaning that sign up and claims can be done in a few easy steps.


Discover Olympia’s Health Spending Account for a small business with employees:

Beginners Guide to Health Spending Accounts for small biz


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