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Flexible benefits are more popular than ever, and that trend isn’t going anywhere. A big question for business owners, of course, is which flexible benefits solution is right for their business.

One that interests many small business owners is the Health Savings Account, or HSA. How do you know if this is the right choice for your business? We put together this guide to help you make a decision.

What Is an HSA?

The first thing to know is what a health savings account is. How do they work, and is your business eligible for one?

The HSA is a benefits program that gives employers and employees major flexibility. With an HSA, you’ll decide how many dollars to give your employees for benefits over the course of the year. You’ll then add these funds to the account.

Your employees can use those dollars for any CRA-approved medical cost. Instead of being restricted by having so many dollars for RMT or so many dollars for dental care, they can use the dollars you’ve given them for whatever they need. That offers them much more control.

As the employer, you can write off the benefits dollars you pay into the HSA, as well as any administrative fees. If your employees have funds left over at the end of the year, you can roll over those dollars and “top up” their account instead of starting from scratch.

Are You Eligible for HSAs?

There are some restrictions on who can adopt HSAs for their businesses. You must be an incorporated business. You’ll also require at least a couple of arms’ length employees, as well as paying income tax.

Some providers do offer HSAs to sole proprietors, but not all do. That’s because sole proprietors often don’t fulfill the requirements. That is, you need one arms’ length employee to be considered for an HSA benefits plan.

Who Benefits from the HSA?

Most businesses benefit from a Health Savings Account plan, because it lets them write off every dollar they contribute to the plan, plus administration fees. With traditional benefits plans, you can only write off a portion of what you spend.

You may also save in that you don’t have to add the same amount to every employee account each year. Unused dollars roll over, so you only need to “top up” the account. The funds you don’t use can be directed to other business uses.

Finally, employers stand to benefit from happier, more productive employees. Team members who believe they have a good benefits package are less likely to leave, which reduces turnover costs. It may also help productivity, as more satisfied, healthier employees tend to come in more often and contribute better ideas.

What about your employees? Most people are fairly happy with HSAs, because they provide much more flexibility than other types of benefits plans.

By themselves, HSAs are often good choices for employees who have limited health needs. Often, younger employees and single employees benefit the most. They may not make use of a wide variety of benefits, and the benefits they do have might not cover the costs, such as extensive dental work or prescription medications. HSAs give them more flexibility to buy what they want.

Does that mean HSAs don’t work for older employees, those with families, or those who have complex medical needs? Not at all. Combining an HSA with a high-deductible health benefits plan can help your employees get more of the coverage they require. The HSA could reduce employees’ deductibles or amounts not covered by the benefits plan, while the plan provides additional coverage.

Finding the Right Provider

If you’re eligible for an HSA plan for your business and the outlined benefits align with your business needs, then your next step will be finding the right provider.

You can start by researching different plans offered by various providers. If you’re curious about what an HSA could do for your team members, get in touch with us.

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Mario Malatesta

With experience in the financial services industry and the group benefits industry, Mario Malatesta founded GroupQuest Benefits Resources Inc with just his business partner. Today, GroupQuest is a leading Group MGA in Canada with about $150M of group insurance premium in force and a support team of over 35 staff members including: renewal, marketing, sales, and service support teams. GroupQuest has offices in Vancouver, BC and Calgary, AB, as well as a head office in Mississauga, ON.   Mario is married with two children (twins). He enjoys many different sports and travelling with his family.

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