Clients' Edge Employee Benefits

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Is the money in the HSA safe?

It is very important to ensure the money is held in trust in a separate trust account for the administrator’s regular funds. Once it is in such a trust account, you are protected that the funds are used strictly for this purpose and are not co-mingled with other funds.

Why can’t the employer simply give the employee the money and not use a third party?

As per IT-85R2 (a tax interpretation bulletin), the amount must be paid to an independent third party who will hold the funds in trust on behalf of the employee. For the amount to be tax deductible to the Company and tax-free to the employee, it has to be structured similarly to giving a premium to an independent third party like an insurance carrier. In addition, for privacy reasons, you do not want your employees submitting claims to the employer.

Are the funds in the HSA creditor proof?

As the funds are held in Trust for the employee for health care only, they are protected from creditors.

What are the applicable taxes on an HSA?

There is a tax on the administration fees charged on the net contribution. The tax is H S T and premium tax. In Ontario that would be 13% and 2% respectively. In addition, as the Ministry deems a contribution “insurance-like” there is a further premium tax on the net contribution. If the H S A is provided for more than one employee, there is also a PST on the net contribution.

Can I buy over the counter drugs with my HSA?

You are unable to buy over the counter drugs with your HSA because over the counter drugs are not dispensed by a licensed medical practitioner. (the pharmacist)

Can I make a claim for a service outside of Canada?

Claims can come from anywhere. It is quite common that someone may go for a specialized surgery in the US and would be eligible.  In the case where the surgery is not offered close to your home, you can claim reasonable transportation in addition.  The transportation could also apply to a spouse or other person if it would be reasonable expected for medical reasons.

Can the unspent dollars revert back to the company?

The unspent dollars can not revert back to the company. Once the money has been contributed to the employee’s account it is out of the company’s control

What happens when I leave the company?

Once you leave the company your money stays in your own trust with you forever. It is kept in trust and your employer does not know if you have or have not spent the money.  You have your lifetime to spend the funds in the trust.  You can never cash out.

Does my money carry over if not spent?

Your money carries over from year to year however with some administrators, you cannot carry forward claims incurred in the previous year and not reimbursed due to lack of funds in the account.

What if I am the owner?

The H S A program is only applicable in the case of an employer employee relationship. Both the employer and employee can be the same person. Whether you are the owner or not, if you provide employment type services to the Company, you can participate as a recipient of the H S A.

Do I need to be incorporated?

You do not need to be incorporated to utilize the H S A. However if you are not incorporated then there are limits on how much you are able to contribute. The limit is the lesser of $1,500 per year plus $750 per dependent and what you offer your other staff.  There is no limit to the amount you contribute on behalf of a staff member.

Difference between HSA and cost plus?

Similarly, the amount incurred is reimbursed tax free to the employee and the amount is tax deductible to the Company.  The difference is the timing.  An H S A is pre-funded before the claim is incurred.  Set up this way, there is an “element of risk”.  The funds may be in excess or short of the actual claims.  With cost-plus, it is funded after the claim is incurred and therefore one can argue there is no “element of risk”.  Only recently has CRA looked closely to cost-plus arrangements and have denied the deduction to the Company and added the benefit to the employee’s taxable income (double taxation).

Is acupuncture eligible?

Recently, an acupuncturist has been added to the list of eligible licensed medical practitioners.   As long as the service is provided by a Registered Massage Therapist, or an Acupuncturist it is covered.

Can I claim my insurance premiums?

Insurance premiums (for health and dental) are eligible under your HSA.

When can I put in more?

On your annual renewal you can contribute the same, more or less. You’re unable to increase contributions during the year.

What happens when I die?

Your money is held in trust and can be spent by your dependents listed on your account.  If there are no dependents on your account, the money cannot be returned to the estate.

Can I add my parent/children to my HSA?

All dependents can be added to your HSA. If someone is related by blood or marriage, resident in Canada is unable to afford these (or a portion) medical expenses then their claims can go through your HSA.

What claims are eligible with an HSA?

The technical answer is anything that is recognized by CRA as a eligible medical expense.  It is the same definition in the Income Tax Act as for purposes of the H S A.  For practical ease, it is all about the who not the what. Who is offering the service and not what the service are.  . As long as the services and products are provided by a licensed medical practitioner in that jurisdiction it will be eligible.  For a full list of licensed medical practitioners you can refer to 

How to pay under an ASO plan?

With a fully insured plan, the plan sponsor pays premiums each month.  These premiums are set and remain constant throughout the policy term.  Your payments will only change if there is a change in the census of the group.  With an ASO plan, you pay deposits not premiums.  The deposits are used to pay claims, pay stop-loss premiums if applicable, pay travel premiums if applicable, pay pooled premiums if applicable, plus administration on usage and applicable taxes.  As the claims are the only unknown variable, it is estimated or budgeted.  Therefore the deposits are often called budgeted ASO rates.  Depending if you estimated to high or too low, there will be a periodic reconciliation, and the plan sponsor will either receive a refund or have to pay a shortfall.  With most carriers, there is no interest charged or credited to the difference.

My dentist won’t accept my pay direct drug card

Every dentist should accept your drug card. if they will not accept it you can either call the number on the back of the card to work with the dentist or inform your plan administrator who will have it rectified moving forward.
Unlike pharmacies, some dentists will not process the card. But if they can for one insurance carrier, they can for all.

My pay direct drug card is not working

If your drug card is not working it could be caused by an incorrect spelling of your name, your date of birth is transposed in error or a keying error by the pharmacist.  If possible, you should immediately contact the number on the back of the card and they usually can help you right away.  Failing that, you may need to pay for your purchase and then inform your plan administrator who will have it rectified moving forward.

Are there special rules for an orthotics claim?

Just like any other claim, the receipt must be submitted manually to your insurance carrier in order to be reimbursed. Recently some insurance carriers have clarified the eligibility of a claim. In most cases what is covered is as follows:

  • Custom-made orthopedic shoes – footwear made specifically for one patient, from raw materials, using a variety of measurements and a three-dimensional cast of the patient’s feet.
  • Off-the-shelf (pre-fabricated) orthopedic shoes – footwear with specific orthopedic fit and function features.
  • Custom-fitted or modified orthopedic shoes – a shoe is considered to be modified when the orthopedic shoe is permanently changed, for example, adding a rocker sole, or leather patches to accommodate a foot deformity.
  • Custom-made foot orthotics – a device made from a cast of the foot that can be inserted into the shoe to support, align, prevent or accommodate foot abnormalities and improve how the foot functions.

What isn’t covered?

  • Off-the-shelf, non-orthopedic footwear (e.g. comfort shoes and sandals)
  • Shoes purchased specifically for participation in sports or recreational activities (e.g. cleats)
  • Off-the-shelf, non-custom or pre-fabricated orthotics (e.g. Dr. Scholl’s insoles)

What happens when my spouse no longer has benefits or I need to add a dependent or remove one?

Your spouse can be added to your group policy at any time. This is an example of a life event. Your responsibility is as follows:

If you experience a major lifestyles event, you must advise your plan administrator within 31 days of the event. Failure to notify of a lifestyle event within 31 days, medical evidence may be required, limitations may be placed on coverage, or coverage may be declined.

Major lifestyles events include:

  • Marriage (legal or common-law) or Acquisition of a common-law or same-sex spouse
  • Legal Separation
  • Divorce or termination of a common-law relationship
  • Death of spouse or insured child
  • Birth or adoption of a child
  • Loss of spouse’s benefits
  • Dependents becoming ineligible for dependent coverage either due to age or student status.

Can I waive a waiting period for benefits?

Typically there is a 3-month waiting period for a new hire; however you can opt to waive the waiting period.   The choice is either to honour the waiting period or to waive it.  It cannot be shorter or longer on an individual case.

Can I offer different health benefits to different employees?

Within your group plan you are able to specifically define different groups of employees based on their roles within the company, or tenure. You are able to offer each group different benefits. For example you can offer your sales department  80% coverage  and your executives 100% coverage.

Can I buy more benefits than my group offers?

In the case of health and dental the plan is a group plan.  The plan sponsor has chosen a plan that applies to everyone in a class.  In some cases you  can select various options if the plan is set up this way.  But other than what is offered, an employee cannot select other health and dental coverage.  A plan has to have an element of insurance to be offered in a plan.  If an employee can opt for more benefits, they will surely use those and therefore cannot be offered and be priced economically.  Group plans occasionally offer optional pooled benefits such as critical illness or life insurance, spousal life insurance and additional AD&D.  These products can be purchased in addition and separate from your current group plan.  The prices are normally age banded, smoking status, and gender and are medically underwritten.

Do I need to wait for my renewal or can I change my benefits and/or carriers anytime?

Group policies are done on a month-to-month basis even though you renew for a year at a time. At any given time throughout the year with a 30-day notice you can change carriers or make alterations within your plan.

What do I need to do before leaving Canada on business or pleasure?

Before leaving Canada you should take note of your group’s travel policy and be sure to bring your card. If you are out of the country more than the number of days allowed by your plan at one time, more coverage can often be done over the phone.  With some policies, you should also be sure your destination is not on the do not travel to list.

Why am I paying more than my dispensing fee deductible or my co-pay on drugs?

This issue could be caused by your plan having a mandatory generic substitution rule. Therefore if you by the brand name drug instead of the mandatory generic, the pharmacy will charge you the difference of the two drugs.  In addition, there is a set drug fee issued by Health Canada.  The pharmacy can charge more than this suggested fee; however the insurance company cannot reimburse more that the suggested fee.

What happens if there is a high claim?

A high claim only affects a group plan up to a certain limit. Under a fully insured plan this limit is called the large account pooling level.  Under an ASO model (administrative services only), there is no limit unless you add stop-loss insurance.  In that case the employer is only responsible for health claims up to the stop-loss level.  There is a range of large account pooling levels and stop-loss levels.  The amount if risk borne by the carrier will affect the cost of that protection.   With most plans, the level of ceiling will not be adjusted in future years due to the high claim.

What is the student coverage age limits?

Your child is covered up to 21. If they are still a student after 21 they can be covered up to 25 with proof of education.  Some carriers extend this to age 26.  However, if the student is attending a school outside of Canada, coverage should either be obtained from that school or a separate policy as the dependent may be out of the country longer than the group policy allows or would be sent home for treatment once medically able to come home.

What group benefits are taxable?

Unlike health and dental benefits which are non-taxable to the employees, pooled benefits are taxable. Pooled benefits include life insurance, AD&D, long/short-term disability, critical illness and dependent life.   If they are paid by the employer the benefit derived by the coverage would be taxable.  In other words, the death claim would be taxable as would long-term disability payments.  Most often, the employees would therefore pay for these premiums through payroll deduction or the employer would declare the premiums as taxable benefits to the employees so that the employee can receive the benefits tax-free.