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As an employer, you want to attract and retain high-potential employees.
You understand that the best way to accomplish this is to provide a competitive salary and a robust health and wellness program. You’ve budgeted for employee health wellness benefits but aren’t sure which type of program is best for you.
A well-structured wellness plan can help organizations promote their employees' physical and mental well-being. A Wellness Spending Account could be exactly what you’re looking for. It is ideal for companies that want to promote employee wellness and create a workplace health and wellness culture.
What is a Wellness Spending Account?
Employees who have wellness spending accounts (WSAs) can be reimbursed for a variety of wellness-related activities. Despite the word “account” in its name, the wellness spending account is a benefit program that encourages employees to live a healthy, active lifestyle in order to increase employee satisfaction.
Wellness Spending Accounts have monetary limits. As an employer, you will set the limit and select the wellness-related expenses that will be covered. To put it simply, you make all of the decisions. Employees are simply along for the ride (and, of course, the benefits).
While wellness spend accounts are different, the list of eligible expenses generally includes things like:
- Gym membership
- Yoga classes
- Sports equipment
- Naturopaths
- Professional development courses.
You can customize the Wellness Spending Account to offer benefits most relevant to your employees. So if yoga is something that many of your employees love doing, you can include that in your plan. But if your employees prefer something more adventurous, say rock climbing, you can cover that instead.
All claims paid through a Wellness Spending Account are taxable for the employee.
What is covered by a Wellness Spending Account (WSA)?
Each Wellness Spending Account is unique. Typically, the plan provider works closely with the plan sponsor (i.e., the employer) to determine which categories will be included in the plan and which expenses within each selected category will be reimbursed. By covering a wide range of wellness-related activities, WSAs contribute to developing healthier employees, reducing absences and increasing productivity.
Some common Wellness Spending Account categories and their respective eligible products and services are as follows:
Fitness and Sport Activities
- Fitness club memberships
- Yoga membership cost
- Physical activity fees
- Fitness products like running shoes or a bicycle helmet
- Sports products like skis or golf clubs
Nutrition
- OTC supplements
- Dietitian
Personal Development
- Personal development courses
- Textbooks and other materials
Mental Health
- Meditation Retreat
- Hiking retreat
- Aromatherapy
- Art therapy
- Hypnosis
Additional WSA expenses could include:
- Sunglasses
- Teeth whitening
- Smoking cessation programs
- Marriage counseling
- Over-the-counter medication
- Child care or elder care
- Cosmetic treatments
How does a Wellness Spending Account work?
Here is how a Wellness Spending Account works:
- As an employer, you pick the provider with whom to open a WSA account for your employees.
- You set the coverage limits for each class of employees (for instance, $6,000 for senior managers, $5,000 for managers, and $3,000 for other employees).
- You deposit the agreed amount into the WSA in one go or in installments.
- Employees pay out-of-pocket expenses and then file a claim with the WSA provider.
- The provider reviews the claim and approves it if the expense is eligible. The employee receives 100% reimbursement for the eligible expense up to their WSA’s limit.
- Reimbursements through a WSA are considered taxable income for the employee (for example, if an employee makes a successful claim of $800 for a gym membership, this amount will be added to her taxable income for that year).
- It is important to note that the funds used by employees for wellness-related expenses create a taxable benefit, impacting their annual income reporting and tax obligations.
- An employee can file multiple claims for eligible expenses in a year until the account’s balance becomes zero.
- An employee does not have to spend the entire WSA allowance. Generally, any unused amount is usually carried forward for one plan year, after which it is returned to the employer.
- Employees can receive reimbursement only for eligible expenses listed in their WSA plan. Also, they cannot claim over their maximum annual limit.
- Employers only need to pay for the actual, eligible expenses, up to the predefined limit, plus administration fee (usually 7.5% or 8%) and applicable taxes.
What are the benefits of a Wellness Spending Account?
- Promotes employee wellness
- Gives employees the flexibility to spend funds where they feel they need it most
- Cost control for employers as they know how much they will have to contribute
- Helps employers attract and retain talented employees
- A great addition to a Health Spending Account (HSA).
What is a Health Spending Account?
Employers can offer health and dental benefits to their employees through a Health Spending Account (HSA). Its primary goal is to help employees cover various medical expenses.
An HSA works similarly to a WSA. The annual limit is set by the employer, and the account is funded. Employees may be reimbursed for qualifying medical expenses up to their annual limits.
The Canadian Revenue Agency determines qualified HSA expenses (CRA). An HSA, in general, covers many of the same medical expenses as traditional health plans, as well as a wide range of additional health-related services, devices, and facilities.
These may include:
- Health practitioners, including psychologists, massage therapists, and chiropractors
- Assistance equipment and devices, including hearing aids, CPAP machines, and prescribed orthopedics
- Prescription drugs, like insulin, vitamin B12, etc.
- Dental care, which includes preventative care, diagnostic care and restorative care
- Hospitals, care, and facilities, including care in a nursing home
- Additional expenses, like radiological procedures, rehabilitative therapy, and laser eye surgery, and more.
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What are the benefits of a Wellness Spending Account for employee wellness?
- Promotes employee wellness
- Gives employees the flexibility to spend funds where they feel they need them most
- Cost control for employers as they know how much they will have to contribute
- Helps employers attract and retain talented employees
- A great addition to a Health Spending Account (HSA)
- A well-structured wellness plan can significantly enhance employee satisfaction and well-being.
What is a Health Spending Account?
Employers can offer health and dental benefits to their employees through a Health Spending Account (HSA). Its primary goal is to help employees cover various medical expenses.
An HSA works similarly to a WSA. The annual limit is set by the employer, and the account is funded. Employees may be reimbursed for qualifying medical expenses up to their annual limits.
The Canadian Revenue Agency determines qualified HSA expenses (CRA). An HSA, in general, covers many of the same medical expenses as traditional health plans, as well as a wide range of additional health-related services, devices, and facilities.
These may include:
- Health practitioners, including psychologists, massage therapists, and chiropractors
- Assistance equipment and devices, including hearing aids, CPAP machines, and prescribed orthopedics
- Prescription drugs, like insulin, vitamin B12, etc.
- Dental care, which includes preventative care, diagnostic care, and restorative care
- Hospitals, care, and facilities, including care in a nursing home
- Additional expenses, like radiological procedures, rehabilitative therapy, laser eye surgery, and more.
Your employees are given a set amount to spend on eligible health-related expenses every year. They can receive reimbursement for medical expenses incurred by themselves and their dependents. The best part of the HSA is that your employees can spend the money allocated to them as they see fit.
For example, if an employee has a $5,000 yearly limit on their HSA, they may decide to use 50% of it to cover prescription drugs for themselves, 30% for their child's dental care, and the remainder for their partner's massage therapy.
It is important to note that there is one main difference between the HSA and WSA. The benefits under an HSA are tax-free to the employee, while WSA claims are taxable.
Conclusion
The Wellness Spending Account encourages your employees to participate in activities that benefit their health and well-being. It gives them a tax break for various wellness-related activities and products.
If you have any questions, feel free to contact one of Dundas Life's licensed insurance advisors to learn more.
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