Our HSA Select feature combines an HSA Rollback with Excess Medical coverage. It is designed for individuals who operate an incorporated company without arm’s length employees – single member incorporated plans.
Who’s eligible
Incorporated businesses where the business owner is the only employee and member on the plan.
The business owner can contribute funds from their corporation to their personal HSA. The business benefits from a tax deduction for the cost of providing the benefit. The business owner can use tax free funds to pay for eligible medical expenses for them and their qualifying dependants.
Qualifying individuals must still meet Private Health Services Plan (PHSP) guidelines. They must be actively working as an employee of company and generate the majority of their personal income as an employee.
The purpose of the company should be to generate revenue vs investment income. Business owners of holding companies generating passive investment income typically wouldn’t qualify and should be strongly encouraged to speak with a tax professional before starting an HSA as it may be perceived as a shareholder benefit by CRA and potentially subject to negative tax implications for the business owner.
HSA Classic is no longer available for individual plans with the business owner as the only member.
The HSA component
Funds are contributed by the plan sponsor company to the plan member HSA account for time-limited use on a cost-plus basis.
Unused funds remain the asset of the plan sponsor company and are credited back to the plan sponsor company after one year. Unlike group Rollback plans, funds will not carry forward into an optional second year. They will be reset at the end of each annual benefit period.
If the plan is terminated unused funds are credited to the plan sponsor company.
The cost-plus nature of the benefit feature means that an admin fee is applied to pre-funded contributions and not returned on reset.
Expenses can be reimbursed using funds contributed in the current benefit period or the next benefit period. That means claims can be carried forward - if not reimbursed this year, they can be reimbursed next year.
Mandatory Excess Medical coverage
Excess Medical coverage at a cost of $20/month is mandatory to help ensure the plan qualifies as a valid PHSP.
The Excess Medical will be billed at the family rate which will provide coverage to the business owner member and their family – or any future family.
For details, see Excess Medical.
Additional optional benefits
Peace of Mind and Accessory benefits for which single members are eligible can be added as requested:
- EFAP
- MSO
Advantages
- Flexibility for the business owner as the plan member
- Complete cost control for plan sponsor company
- Companies retain ownership of funds until used by the plan member
- Simple administration
How it fits in today's market
- Designed for those looking to maximize value from their business. It also provides:
- Immediate value
- Flexibility
- Tax benefits
The selling opportunities:
We love to position it as making a business owner’s typical medical expenses tax-deductible
High-net-worth individuals with their own businesses/ practices (think dentists, lawyers)
Clients you already manage financially
Networking events with clients looking for new solutions
Referrals from COIs (accountants)
Details
Group Size
1 (no arm’s length employees)
Fees
- 10% on contributions
Contribution limits
- Minimum $3,000/year ($250/month)
Advisor Compensation
- HSA: Recommended 4% but variable (fee will change accordingly based on our 6% fee)
- There will be no “clawback” on compensation after reset of annual funds because admin fees (which include comp) are not credited back
- Standard rates on Excess Medical, POM, and Accessory Benefits (10%)
Funding
Pre-authorized payments only.
Plans with HSA Select features are processed right away on the start of the plan. Payments are subsequently scheduled on the 5th of the month as indicated on the HSA Select application activation.
Regardless if Select contributions are processed annually, premiums and fees for Accessory and POM benefits will be billed monthly.
Eligible Expenses
CRA defined health expenses
Claims carry-forward
Eligible expenses can be reimbursed using funds from either the current or next benefit period. If a Member uses all their funds in one period, they can carry forward their claims and contribute additional funds in the next period to get those expenses reimbursed.
Unused funds at end of Benefit Period
Credited to plan sponsor company to be used as a credit towards the next benefit period.
Unused funds when plan terminated
Unused contribution funds are refunded to plan sponsor company. Admin fees are not credited or refunded.
Eligible Dependants
Related by blood, marriage, or law who are financially dependent on member for the Health Spending Account.
For Accessory and POM benefits, spouse or dependant children under the age of 21. Children attending full time school are eligible until age 25 with proof of enrollment in an accredited institution.