Health Care Spending Accounts
By Lee Vardy (Dan Lawrie Insurance Brokers - an HR-Fusion strategic partner)
Healthcare Spending Accounts (HSA) are quickly gaining popularity among business owners. An HSA allows a corporation to pay for the medical expenses for their key employees in a tax effective manner.
Why set up an HSA?
Most group benefit plans do not cover the full cost of health, drug, dental and vision care claims. As a result, these expenses are paid by the claimant from their personal, after tax, income. Although these claims will qualify as a medical expense on their tax return, there is usually very little, if any, tax savings.
The HSA
allows a corporation to deduct medical costs as a business expense while
providing a tax free benefit to their key employees.
How much can you save with an HSA?
|
Key Employee’s Taxable Income |
Medical Expenses $1,500 Savings* |
Medical Expenses $2,500 Savings* |
Medical Expenses 5,000 Savings* |
|
$50,000 |
$678 |
$980 |
$1572 |
|
$75,000 |
$1150 |
$1796 |
$3175 |
|
$125,000 |
$1299 |
$2043 |
$3670 |
*savings are based on a comparison between claiming medical expenses on a personal tax return vs. the HSA. Fees and taxes associated with the HSA have been included in the calculation.
Does the funding of the HSA have to
be the same for all employees?
HSAs can vary by class of employee. For example, executives may be eligible for $10,000/year and senior managers $5,000/year. It is important that your plan adheres to the requirements of the Income Tax Act.
Are all HSA’s the same?
No, there are many variations on plan design, administration fees, funding requirements and services. It is important that you receive professional advice when setting up your corporations’ Healthcare Spending Account.
For more information call
Lee Vardy, CLU, CH.FC., CFP
Benefits Consultant,
Dan Lawrie Insurance Brokers Ltd
905.525.7259
lvardy@danlawrie.com
