Health spending account vs wellness account

As Canada's job market evolves, so do employee health benefits. Flexibility, customization, and wellness are no longer perks; they are expectations. That’s why more employers are offering Health Spending Accounts (HSAs) and Wellness Spending Accounts (WSAs) to meet the needs of modern employees.

In 2024, Canadian Payroll Services reported that 40% of Canadian employers now offer health spending accounts, which is a 10% increase from 2017. Meanwhile, 29% of employers offer wellness spending accounts. With 79% of employees expressing interest in wellness spending accounts according to Dialogue, it's clear that changes are on the horizon. So, what exactly is the difference between a health spending account and a wellness spending account? Stick around for more info.

HSA vs WSA in Canada

The table that follows provides a side-by-side comparison of HSA and WSA in Canada:

What is a Health Spending Account (HSA Account)?

A health spending account is a way for employers to reimburse employees for out-of-pocket health-related expenses. Set up under Canada Revenue Agency guidelines, health spending accounts cover eligible medical expenses not covered by provincial health plans or group insurance.

Eligible health care expenses under HSA

Eligible medical expenses under an HSA include:

• Glasses and vision care

• Hearing aids or adaptive tools

• Dental services

• Prescription drugs

• Massage therapy, physical therapy or a chiropractor

• Fertility treatments

• Psychiatric treatment

• Medical marijuana

• Specialized dietary requirements

According to the Canadian Revenue Agency regulations, these payments are tax-free for employees and completely deductible for employers on their taxable income for the year.

What is a wellness spending account (WSA)?

A WSA is similar to an HSA in that your employees get a set amount of money they can spend each year on approved benefits. With a WSA, however, the benefits covered are different from those covered by an HSA.

Wellness Spending Accounts benefits are generally associated with expenses that come with healthy living and lifestyle choices. The purpose of a WSA is to encourage employees to pursue activities that will improve both their physical and mental health.

Employee wellness expenses covered

Employee wellness: eligible expenses include:

• Gym memberships

• Sports equipment

• Yoga classes

• Personal development courses

• Nutrition services or supplements

• Naturopaths and other holistic practices

Canadians now spend about $2,000 per year on wellness and maintaining a healthy lifestyle. Having a wellness spending account can help offset these wellness expenses, making them a compelling addition for employers who want to improve employee satisfaction and promote a work-life balance to prospective employees.

Comparison: HSA vs. WSA

Here’s a closer look at the differences between health spending accounts and wellness spending accounts below:

Eligible expenses

• HSA: Medical, dental, vision, and paramedical services.

• WSA: Wellness perks like fitness classes, therapy, lifestyle coaching, fitness gear, and more.

Tax implications

• HSA: Employer contributions are considered tax-deductible, and reimbursements are a tax-free allowance for employees.

• WSA: Contributions are taxable benefits for an employee's taxable salary.

Fund rollover rules

• HSA: May roll over to the next calendar year if not used.

• WSA: Can typically be used only in a single year.

Usage flexibility

• HSA: Strictly for health care use.

• WSA: Offers more flexibility to employers and employees.

Employer goals

• HSA: Best for addressing medical coverage gaps and controlling costs.

• WSA: Ideal for promoting employee well-being and mental health.

Common use scenarios of these benefits plans

To provide more insight into the differences between health spending accounts and wellness spending accounts, let's look at two hypothetical scenarios below:

Scenario 1: HSA for a young family

Emma and Jordan have two small children. Their dental, vision, prescription medications, and occasional physiotherapy costs can add up over time. Their healthcare insurance provides reimbursement for these costs tax-free, saving the family hundreds each year.

Scenario 2: WSA for a wellness-focused professional

Jennifer is a single, young professional working in the tech industry who values a work-life balance. Her employer offers a wellness spending account that allows her to expense activities like yoga, spin, therapy sessions, and a new standing desk for the days when she works at home during the week. Although these expenses are taxable, they allow Jennifer to maintain a healthy lifestyle.

Can you have both a health spending account and wellness spending account?

You can! Many employers in Canada offer both health and wellness spending accounts to their employees. Offering both enables employees to tailor their benefits to their lifestyle, while companies can hire top talent with a more flexible and adaptable plan.

Can I use my HSA for my spouse or children?

Yes. HSA funds can be used to cover qualified medical expenses for your partner and any dependent children, as long as they are approved by the CRA.

Do WSAs cover alternative wellness services like acupuncture or massage?

It all depends on the company's plan. Many WSAs cover alternative treatments like acupuncture and massage, but coverage varies and is determined by the employer, so make sure to double-check with your employer directly.

The bottom line

When it comes to health spending accounts and wellness spending accounts, there’s no one-size-fits-all answer. It depends on what your organization values and what you need as an employee.

At BrokerLink, we’re here to answer any questions you may have about health and wellness compensation, health insurance, life insurance, and more. To get an idea of whether you should offer HSA accounts or WSA accounts, or both, we can discuss the following with you:

• Your budget

• Your goal in offering HSA or WSA accounts

• The kind of benefits your business already offers

• How these accounts can improve your employees’ well-being

Ready to build a modern benefits plan? Contact BrokerLink to speak with us today!

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