How does Credit or Expense Carry Forward work? How is PreTax Health Unique?

Benefits typically run in periods, so that a new benefit limit is allocated to employees for each new period. A period is typically 12 months, so many companies like to align their benefit period with their financial year.

As each benefit period or year ends, Canada Revenue Agency allows one of three things to happen with the unused credits from that period. Your company can select which one of these options should apply company-wide:

1. No Carry Forward: After the end of the benefit period, an employee can no longer claim receipts from that period. Any unused portion of their allocated Health Spending Account benefit limit from that period is forfeited, and the employee starts the new benefit period with a brand new benefit limit allocation.
2. Credit Carry Forward: After the end of the benefit period, an employee can no longer claim receipts from that period. The employee is given a brand new benefit limit allocation for the new period; and in addition, the unused portion from the prior period is carried forward for one year. For example, if an employee has a $5,000 annual limit and submits only $3,000 for the current benefit year, $2,000 is carried forward into the next benefit year (and is thus added on to the new $5,000 allocation for the new year). The employee will enjoy an effective benefit limit of $7,000 for that new year. Should the employee only submit claims of $4,000 for that new year, the unused $1,000 (based on the $5,000 granted benefit for the year) will be carried forward one year into the following year, and added onto the new $5,000 allocation for that subsequent year, resulting in an effective benefit of $6,000 for that third year; and so forth.
3. Expense Carry Forward: With this option, although there is no carry forward of credits, an employee can continue to claim old receipts from the previous year, in the following period. For example, if an employee looses a health claim receipt and doesn't discover this receipt until the following year (a full year after it was incurred), he/she still has the flexibility to submit that claim. This is a great option, especially for smaller business, since the benefit limit allocation for the current year can be changed at any time.

What makes PreTax Health Unique?

Most other industry plans offer only the credit carry forward option. Few, if any, offer expense carry forward. Only PreTax Health offers both options.

To our knowledge, we are also the only system where the company can change its mind regarding its carry forward option, and elect to switch from one option to another without penalty, while retaining complete compliance with CRA rules.