Healthcare Spending Account (HCSA)

A Healthcare Spending Account (HCSA) is a flexible, employer-funded benefit that reimburses employees for a wide range of eligible healthcare expenses not fully covered by their group insurance plan or a government health plan. It allows employees to use allocated funds toward medical, dental, and vision expenses based on their personal needs. The Canada Revenue Agency (CRA) regulates which expenses qualify under the Income Tax Act, and reimbursements from an HCSA are received tax-free.

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Each employee is given an annual credit balance, such as $500 or $1,000, which can be used to pay for eligible expenses like prescription drugs, paramedical services, orthodontics, glasses, or medical equipment. Unused balances may expire or roll over for one additional year, depending on the employer’s plan design. HSAs are popular for their flexibility and ability to supplement traditional group benefits.

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Example:

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If your group insurance plan covers 80 percent of physiotherapy costs and you pay the remaining $20 per visit, you can submit the unpaid balance to your HCSA for reimbursement until your account credits are used up.

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What to Watch For:

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Confirm your employer’s rules for carry-forward of unused credits or unpaid claims. HCSA funds are employer-provided, so they do not accumulate if you leave your job. Keep receipts and submit claims within the specified timeframe, as expired credits cannot be reinstated. Check that all expenses comply with CRA’s list of eligible medical expenses to ensure tax-free reimbursement.