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Will the changes to Health and Welfare Trusts impact Health Spending Accounts?

Posted by Robin Fry & Alden Hui on September 6, 2019


We have been receiving inquiries about a Health and Welfare Trust (HWT) being reclassified to an Employee Life and Health Trust (ELHT) and how it (if at all) may impact the operation and effectiveness of the Olympia Benefits Health Spending Account (HSA), or also referred to as, Private Health Services Plan (PHSP). We are confident that these changes will not affect your Olympia Plans.

Here are some facts you need to know:

1. There are significant differences between a PHSP/HSA and an HWT/ELHT.

These two programs are distinct methods of providing health and dental benefits to employees and are treated differently under the Income Tax Act.

2. An HWT (soon to become an ELHT) is a “trust” and as with all trusts, may be made up of several different components.

Trusts must adhere to legislation with the Income Tax Act.

3. A PHSP/HSA is an insurance contract between an employer and employees that pays for medical and dental expenses.

Its distinction is that it can be a standalone plan and has specific tax laws that govern it.

4. An ELHT may contain a PHSP as one of its trust components.

5. One of the conditions for the ELHT is that the business must have a class of beneficiaries who are not shareholders of the company.

This means that if there are no employees other than shareholders, then it will not be eligible as an ELHT. There are no such restrictions for a standalone PHSP.

6. Of special note, if an ELHT provides a PHSP as a designated employee benefit but does not meet all the conditions to be an ELHT, then the PHSP loses its tax-free status.

The bottom line

All customers of Olympia Benefits are enrolled in a PHSP/HSA and these plans will not be affected by the proposed legislative change of a Health and Welfare Trust (HWT) to an Employee Life and Health Trust (ELHT).


Learn more about a Health Spending Account:

beginner's guide to health spending accounts HSA 2020 eligible expenses

Topics: PHSP, health spending account, health and welfare trust