We’ve had Advisors and Plan Sponsors ask us about the different ways the Canada Revenue Agency (CRA) allows Health Spending Accounts (HSAs) to be delivered and how our Blendable options line up.
We’re here to clear any confusion about the rules and the Blendable perspective.
CRA guidelines for HSAs
The CRA allows two different models for setting up an HSA. An HSA provider can choose to offer either model or both models as part of their product line. However, a choice must be made at setup. Plans can’t switch between models as they go.
Claims carry-forward
Expenses incurred in a given Benefit Period (the 12 months between renewal dates) can be carried forward and reimbursed using funds contributed in the next Benefit Period.
This means that if a Plan Member doesn’t have enough funds to reimburse their expenses, they can submit the expenses the next Benefit Period when new funds are available.
However, because balances are reset each year, claims carry-forward HSAs create a use-it-or-lose-it situation. If Plan Members don’t use all their contributions during the Benefit Period they’ll miss out on this part of their compensation.
Balance carry-forward
Unused contributions from a given Benefit Period can be carried forward to the next Benefit Period. Funds can remain in the HSA for a maximum of 2 years (2 Benefit Periods).
Expenses incurred in a Benefit Period can be reimbursed using funds contributed in that Benefit Period, or the previous Benefit Period.
This means Plan Members can budget by letting funds accumulate. For example, getting orthodontic work done in year 2 when they have funds available to fully reimburse the expense.
Balance carry-forward also reduces the use-it-or-lose-it mentality. Funds aren’t reset each year so Plan Members have more time to take advantage of their benefits.
The Blendable philosophy
When choosing which model to use for our HSAs, our philosophies about Group Benefits guided us:
- The Plan Sponsor should have transparency and cost control;
- Plan Members should get the maximum benefit from their HSA; and
- The Plan should be fair and equitable for all Plan Members.
Blendable Group HSAs
Our Group HSAs (HSA Classic, HSA Rollback, HSA Rollover, HSA Advanced, HSA Wellness) have always used the balance carry-forward option.
This aligns with our philosophy because:
- Plan Sponsors understand their contributions and can adjust each renewal;
- Plan Members can accumulate funds, allowing them to budget for future expenses and maximize the use of their funds; and
- If we chose to use claims carry-forward then contributions would reset each year, resulting in a use-it-or-lose-it mentality that isn’t equitable for all Plan Members.
Blendable HSA Select
The one Blendable HSA that uses claims carry-forward is our HSA Select for incorporated individuals.
Allowing claims carry-forward here simplifies renewal (and the reset, billing, and funding decision) for since in this case an individual has separate roles as both the Plan Sponsor and the only Plan Member.
Because the Plan Sponsor is also the only Plan Member, this doesn’t create a use-it-or-lose-it scenario that’s unfair or limits the impact of the Plan. Plan Sponsors simply choose to contribute a suitable amount for medical expenses (within the framework of what is a reasonable contribution based on their position and industry).
But you’re so flexible! Why can’t we carry claims forward?
The short-term answer – because we built our business and our features around our philosophy that it doesn’t provide as much value and therefore our systems don’t allow it.
But in the long term? You never know! If we felt there was a need, and a claims carry-forward option was in the best interests of Plan Sponsors and Plan Members than it could become a reality.