December 2021

The purpose of a Health Spending Account (HSA) or a Personal Spending Account (PSA) is to help provide additional financial support, as well as give employees the option to make positive lifestyle changes. Medical expenses can be quite costly and not everything is covered on a traditional group plan – having an HSA or PSA gives you options you may not otherwise explore.  

What is a HSA?

A Health Spending Account (HSA) is an account provided by an employer for their employees, where the allotted money is used to pay for additional health and dental expenses that go above the amount covered by the plan. 

This is a way for employers to provide their people with tax-free health and dental benefits. A HSA only applies to the health and dental benefits approved by the CRA Website, as it is an option governed by the CRA. 

Benefits of a HSA

HSAs help people with high deductible health insurance plans cover their out-of-pocket costs. For example, if your core benefits plan has 80% coinsurance for vision, the remaining 20% that you’d be required to pay out of pocket could be submitted to your HSA. Contributions to HSAs are also not subject to federal income tax and are therefore tax-free (this excludes employees that reside in the province of Quebec).

Eligible HSA expenses include a wide range of medical, dental, and mental health services. So, because your core plan only has basic and preventable coverage, if you are getting Invisalign which is classified as orthodontics, you could submit this to your HSA for coverage.

What is a PSA?

A Personal Spending Account (PSA), also known as a Wellness Spending Account (WSA), is a way to add wellness options to any group benefits plan. PSA’s provide additional health and wellness options that a traditional group benefits plan may not cover. An employer chooses what is and isn’t covered under the plan when setting it up. 

Some of these PSA eligible expenses include:

• Personal training and consultation
• Gym memberships
• Child and elder care
• Classes such as dance, boxing, yoga, etc.
• Tuition fees 

Benefits of a PSA

A PSA is flexible and can be used to accommodate on an individual basis. They cover expenses a traditional group benefits plan does not, so it’s less money spent out of the employee’s own pocket. PSAs also provide opportunities to engage in additional activities one may otherwise not due to financial constraint.

Differences between an HSA and a PSA?

• HSAs are 100% employer funded, therefore are non-taxable benefits for employees
• PSAs are a taxable benefit as they are considered part of an employee’s compensation, and they will need to be included on the employees T4

Interested in learning more about HSAs and PSAs and how you can implement them at your company? Contact our benefits team at benefits@humi.ca!