Incorporated business owners
A standalone HSA lets you run health, dental and vision expenses through your corporation, which makes it a tax-efficient way to pay for them.
Healthcare Spending Accounts · Ontario
A defined allowance for eligible healthcare expenses.
A Healthcare Spending Account (HSA) gives each eligible employee a set annual amount to put toward eligible healthcare expenses. The employer decides the amount and the rules; the employee decides how to use it. It can stand alone in some situations, or sit alongside insured coverage.
The employer sets the allowance. Employees use it for eligible expenses.
- 01
The employer sets the allowance.
A fixed annual amount per employee, which can differ by class, plus the plan rules (for example, whether unused balances carry forward).
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An eligible expense occurs.
An employee or eligible dependant incurs an expense that qualifies under the arrangement.
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The claim is reviewed.
The administrator checks the claim against the eligible-expense rules and the available balance, then reimburses it.
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The employer funds it.
The employer pays the reimbursed amount plus the administration fee and any applicable taxes, as the arrangement sets out.
Illustrative only. Eligibility, tax treatment, fees, funding and administrative rules depend on the specific arrangement, the administrator and the jurisdiction, and should be confirmed before a plan is set up.
Pay only when someone makes a claim.
An HSA is pay-as-you-go. There's no deposit and no setup fee. You set a limit for each employee and you're billed only when claims are made.
Small and mid-size teams (2 to 50 employees)
A good first benefit plan: employees spend on what suits them, and you can design different amounts for different employee classes.
Larger employers (50+ employees)
Add an HSA as a top-up to an existing insured plan to cover what the plan leaves out.
If an employee leaves, any remaining balance is forfeited. You control who is covered and how much, and you can end coverage without termination fees.
Estimate what an HSA would cost you
Cost = the claims your team makes, plus the administration fee, plus taxes. Change the numbers to see your estimate.
- Expected claims
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- Administration fee
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- Taxes
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Expected yearly cost
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Maximum yearly cost
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if every allowance is used in full
Tax breakdown
- Retail sales tax, 8% of claims
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- Premium tax, 2% of claims
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- HST, 13% of the administration fee
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- Premium tax, 2% of the administration fee
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An estimate to help you plan, not a quote. You only pay for claims actually made, plus the fee and taxes on them. Taxes shown are Ontario rates; your exact fee depends on the administrator.
A small number of rules define the whole account.
Because there is no insurer pricing the risk, the employer's choices do most of the work. These are the ones that matter.
- The annual allowance, and whether it differs by employee class.
- Whether unused amounts carry forward, and for how long.
- Who is eligible, including dependants.
- Whether the HSA stands alone or sits alongside an insured plan.
An HSA is not the same as insurance.
A spending account reimburses eligible expenses up to the available allowance. It does not, on its own, protect against every large or unexpected risk the way an insured plan can. For many employers the useful answer is a combination.
| Insured group plan | Healthcare Spending Account | |
|---|---|---|
| What it does | Insures defined benefits (drugs, dental, disability, life) under a policy. | Reimburses eligible healthcare expenses up to a set allowance. |
| How the cost works | Premiums set by the insurer, renewed and repriced each year. | Employer funds actual claims plus an administration fee and applicable taxes; the ceiling is the allowance. |
| Large or unexpected claims | Covered according to the policy limits and definitions. | Capped at the allowance. Not a substitute for insuring catastrophic risk. |
| Eligible expenses | Defined by the policy for each benefit. | Defined by the arrangement and the applicable rules for eligible medical expenses. |
| Employee choice | Employees use the benefits the plan includes. | Employees direct the allowance to the eligible expenses that matter to them. |
| Who carries the risk | The insurer, in exchange for the premium. | The employer, limited to the allowance it set. |
Two accounts that are often mentioned together, and shouldn't be confused.
Healthcare Spending Account
Reimburses eligible healthcare expenses, such as prescriptions, dental work or paramedical services, that qualify under the arrangement and the applicable rules.
Wellness Spending Account
Reimburses employer-chosen lifestyle and wellness categories, such as fitness memberships or equipment, that the employer decides to include. The eligible list is the employer's to define.
The two accounts have different eligible expenses and are generally treated differently for tax purposes. Treat them as separate decisions. Your Friend With Benefits can discuss both; the specific treatment for your business should be confirmed with the administrator and your accountant.
For an employer that wants a clear annual allocation and more choice, an HSA may be worth reviewing.
The right structure depends on the workforce and the protections you still need alongside it.