Coastal HSA helps Canadian businesses provide health benefits through Health Spending Accounts (HSAs). HSAs offer a simple, flexible, and tax-efficient alternative to traditional group benefits, making them an excellent solution for many small and medium-sized businesses.
Whether your client has one employee or fifty, Coastal HSA makes it easy to set up and manage a health benefits plan without the complexity and high fixed costs often associated with traditional insurance plans.
Why Accountants Recommend HSAs
Health Spending Accounts can provide significant tax advantages for incorporated businesses:
- 100% tax-deductible business expense
- Tax-free reimbursement for employees
- No payroll taxes on reimbursements
- Fixed, predictable benefit budgets
- No monthly premiums
- No long-term contracts
- Easy administration
Common Client Situations
Incorporated Business with No Benefits Plan
Many small businesses want to provide health benefits but find traditional group plans expensive or restrictive. An HSA allows the employer to set a fixed annual budget while employees claim only the healthcare expenses they actually incur.
Owner-Managed Corporation
Many incorporated business owners use HSAs to pay for eligible personal and family medical expenses through their corporation in a tax-efficient manner.
Nonprofits and Charities
Organizations with limited budgets can provide meaningful health benefits without committing to large monthly premiums or complex insurance plans.
Growing Businesses
Companies that are hiring and retaining talent often use HSAs as a flexible employee benefit that can be tailored to their budget.
HSA vs. Salary Increase
| Feature | Health Spending Account | Salary Increase |
|---|---|---|
| Deductible to Employer | Yes | Yes |
| Tax-Free to Employee | Yes | No |
| CPP/EI Implications | No | Yes |
| Supports Healthcare Costs | Yes | No |
| Cost Efficiency for Healthcare Spending | High | Lower |
Key HSA Eligibility and Plan Rules
- Business Eligibility
The business must be incorporated, or if it is a sole proprietorship, it must have at least one arm’s-length employee. - T4 Income Requirement
Owner-managers should receive T4 employment income. HSA allocations are generally limited to a max of 20% of that T4 income. - Fixed Annual Allocations
HSA allocations must be established before the start of the plan year and remain fixed throughout the year. - Consistent Employee Benefits
Employees with similar roles, responsibilities, and seniority should receive the same HSA allocation. - No Backdating
HSA plans must be set up in advance and cannot be backdated to cover expenses incurred before the plan’s effective date.
Frequently Asked Questions
Are incorporated business owners eligible?
Yes, but they must have T4 income from the business.
Are shareholder-employees eligible?
Yes, if the shareholder-employee has T4 income from the business.
Are sole proprietors eligible?
Yes, if they have at least one arm’s length employee.
Can family members be covered?
Yes. Eligible dependents can be included under the plan.
How are claims verified?
Employees submit supporting documentation, and claims are reviewed to ensure they meet CRA requirements.
What expenses are eligible?
Generally, expenses that qualify as medical expenses under the Income Tax Act may be eligible, including dental care, prescription medications, vision care, paramedical services, and many other healthcare expenses.
https://www.coastalhsa.ca/health-spending-accounts-eligible-health-expenses/
Refer a Client
If you have a client who may benefit from a Health Spending Account, we’re happy to answer questions, provide plan recommendations, and assist with implementation.
To get started, your client can create an account here: https://app.coastalhsa.ca/signup
Our team can also meet directly with your client, explain how HSAs work, and handle the setup process from start to finish.
Have Questions?
We’re always available to discuss specific client situations and help determine whether an HSA is the right fit.
Book a call or contact our team to learn more.
