What are the costs for the PreTax Health Spending Account Plan?

Let's first consider the costs of NOT having a PreTax Health Spending Account. Irrespective your tax rate, you're then effectively paying the CRA a 40%+ "handling charge" on your out-of-pocket medical expenses! (See example below if you wonder why).

By contrast, this is what PreTax Health costs the employer:

1. A One-Time Setup Charge for new HSAs:
   • $99 + GST/HST
     • If you are moving from another HSA/PHSP, this setup charge is waived.
        
2. Ongoing Admin Fee: 10% for all adjudication, payment and administration of claims, plus GST/HST (taxes only on the 10% admin fee).
   • Compare this with the 40%+ "handling charge" you're paying to the CRA otherwise: it really is a no-brainer!

Example with PreTax Health:

For a $500 claim, the employer would submit a payment of $500 + $50 admin fee + $2.50 GST/HST on admin fee.

Note: You'll be charged your province's HST rate (only on the admin fee) if your company is based in one of the HST participating provinces. Otherwise you'll be charged the GST rate (only on the admin fee).

Example WITHOUT PreTax Health:

To pay for a $500 medical expense, the employer would have to remunerate $714 to the employee if the employee's tax rate is 30% (70% of $714 is $500). This is equivalent to the employer paying a 43% "handling charge" on the $500!