Buyer Beware #5 – Classes Are Key

Some more help on finding the right HSA for you in my series on items you should look for when choosing an HSA provider…

Classes Are Key

I received a call the other day from an advisor with questions regarding Health Spending Accounts.  He had a client with a Health Spending Account at another provider and wanted to switch it over to Benecaid.  I said sure and asked him how many classes were in the group.  I heard silence at the other end of the phone.

It turns out that the client had set up the Health Spending Account for themselves and not for the other employees in the company.  In theory, this is OK.  The problem was that he did nothing to distinguish himself from the other employees in order to receive this benefit nor did he establish a fixed amount or maximum.  This can cause issues for the Canada Revenue Agency, specifically when you need to explain that this is not a shareholder benefit.  The key to clarity is classes.

The interpretation bulletins are for interpretation.  This means that as an HSA owner, you should make every effort to show your interest in following the rules and using the gift CRA has given Canadians in a sensible way.  Establishing classes in your company based on work roles and performance is a great first step to show that you are acting in good-faith.  You do not need to offer an HSA to all employees, but you should always provide the benefit to members of the same class.  Each class should have defined contribution amounts or limits reasonable to the work and compensation of the employees within the class.  If you have a team of executives, of which one member is the owner, you should offer an HSA to the entire team.  If you only have one owner in the team of executives, you should make a distinction as to why they are entitled to the HSA versus other employees.  Establishing benefit classes, one for executives and another for administrative employees is a great start.

If you currently have an HSA or are considering one, be sure to ask your HSA provider about the establishment of classes  If they don’t know what benefit classes are….buyer beware!!