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HSA Basics

A Health Spending Account (HSA) is a flexible, tax-effective health benefits plan for Canadian teams. It allows employers to allocate a set amount of tax-free health credits to their employees, who can then use those funds to cover a wide range of eligible medical expenses — including dental, vision care, prescription drugs, and over 100 other CRA-approved health services.

HSAs cover a wide range of health-related expenses including dental care, vision, prescriptions, physiotherapy, mental health services, and more. Coastal HSA follows CRA guidelines. See a full list of eligible expenses here → www.coastalhsa.ca/health-spending-accounts-eligible-health-expenses/

Canadian corporations and non-profit organizations are eligible. Sole proprietorships and partnerships also qualify, provided they have at least one full-time arm’s length employee.

Annual Rollover & Expiry Policy: Health credits are valid for up to 2 years. Every January 1 any unused health credits go into carryover and will be valid for one additional calendar year before expiring. For example: a credit from March 2024 will roll over on January 1, 2025, and remain available until it expires on January 1, 2026. 

Available across Canada, except in Quebec.

A Health Spending Account (HSA) lets employers reimburse employees for eligible health and dental expenses in a tax-efficient way.

The employer sets an annual allowance. Employees pay for eligible expenses, submit a receipt, and get reimbursed up to their limit.

No, HSA reimbursements are 100% tax-free for employees and tax-deductible for the business, making it one of the most efficient ways to offer health benefits in Canada.

Employees:

You can receive your Health Spending Account (HSA) allocation quarterly or annually, depending on how your plan is set up.

Quarterly allocation: Your total annual amount is divided into four equal portions and added to your account at the start of each quarter (January 1, April 1, July 1, and October 1).

Annual allocation: Your full HSA amount is made available at the beginning of the year (January 1).

The allocation schedule is determined by your employer when the plan is set up.

Yes! Dental care and vision expenses are some of the most commonly reimbursed HSA claims. This includes cleanings, fillings, eye exams, contact lenses, glasses, and more.

Any unused funds at the end of the calendar year will roll over into the following year. However, they must be claimed by the end of that second year—otherwise, they will be forfeited in accordance with Canada Revenue Agency (CRA) rules.

First, make a claim to your spouse's insurance based plan. Typically, they will send you an explanation of benefits to show what was not covered. Simply claim the uncovered amount under your Health Wallet.

January 1st of every year.

The claim deadline is March 1 following the year in which the expense was incurred. For example, if you have expenses in 2020, you must submit all yours claim by March 1, 2021. However, we encourage users to submit claims within 4 weeks of the purchase or service date if possible.

Yes, as long as the expense is on the approved list of eligible expenses. You’ll need to provide a screenshot from your credit card showing the exact amount you paid in Canadian funds. We do not exchange any currencies.

Since your HSA is an employment benefit, it ends on your last day of work. Some plans include a run-out period, during which you can still submit claims for expenses incurred while you were employed.

No, gym memberships and bikes are not eligible expenses under a Health Spending Account. These items are considered general wellness or personal expenses and are not covered per CRA.

A dependent must meet one of following criteria:

  • Spouse or common-law partner per CRA definition.
  • You or your spouse’s or common-law partner’s child under 21.
  • You or your spouse’s or common-law partner’s child between 21-26 and studying full time at a recognized education institution.
  • A person under 21 for whom you or your spouse or common-law partner is the primary caregiver and main financial support.
  • You or your spouse’s or common-law partner’s child, or other close relative who is incapable of financial self-support because of a diagnosed disability. They must be under 65, live in the same household, and be primarily dependent on you or your spouse for financial support.

Plan Admins:

Traditional insurance plans come with fixed premiums, exclusions, and usage restrictions. An HSA, on the other hand, gives employees a flexible spending account they can use for any CRA-eligible health expense—no deductibles, no co-pays, and no category limits. 

There’s no CRA-set limit, but contribution amounts should be reasonable and consistent across employee classes. Coastal typically recommends $1,000–$15,000 annually depending on role and seniority. At Coastal HSA, HSA amounts cannot be greater than 25% of an employee's T4 income. 

Employee HSA allocations can be updated at any time, but changes will take effect on January 1st of the following year, in accordance with CRA guidelines.

Coastal HSA has no monthly or annual fees. You simply pay a 7% admin fee (plus GST) on approved claims, and this cost is fully deductible as a business expense. There is also a one-time $50 One-Time Account Activation Fee.

Yes. The full allocation is available to the employee and their dependents. For example, if you assign an employee $2,500 per year, that amount can be used by the employee and/or their dependents.

Employees with comparable job duties, responsibilities, and experience should receive the same HSA allocation to maintain fairness and CRA compliance.

No, only claims after the plan start date can be submitted.

Yes, it's $1000 health credits annually per user. 

Employee Benefit Tax Deductions

The claim deadline is March 1 following the year in which the expense was incurred. For example, if you have expenses in 2020, you must submit all yours claim by March 1, 2021. However, we encourage users to submit claims within 4 weeks of the purchase or service date if possible.

Yes, but the shareholder must be an active employee and have T4 income.

When an employee leaves your organization, be sure to deactivate their Health Wallet promptly. As the plan administrator, you can log into your Coastal HSA admin dashboard and remove the employee. If a run-out period is enabled, the employee may still submit claims for expenses incurred before their termination date during that period.

Deep Dive into Health Spending Accounts (HSAs)