A health spending account is a simple way to offer a plan that is incredibly flexible in terms of what you can use money for, allows employee to have full control of what they would like to spend their money on, and allows for zero dollars wasted.
Basically a health spending account is an account an employer puts money in for an employee to use on health expenses. The money in a health spending account can be used for a wide variety of health related expenses. There is also another form of account similar to a Health Spending Account called a Health and Welfare Trust (HWT). We will be talking specifically about the HWT. The benefits of a Health and Welfare Trust are as follows;
-The money stays in that employees hands for the rest of their lives.
-The money is a tax deduction for the employer and recieved tax free by the employee.
-An employer has full flexibility to change the dollars contributed to every employee every year.
-They can also offer more or less money to different classes of employees.
Please see the following illustration to further explain how these work.
- Employer places money in an account called a Health and Welfare Trust. This is a tax deduction to the corporation.
- Employer enrolls different employees in the plan by creating individual Health Spending Accounts.
- Employees use the money tax free as they wish on a wide variety of expenses. If they don't use the money it carries forward indefinitely.
- The plan provider administers claims.
Some people who have a corporation will give money to themselves as a way to get money tax free out of their corporation.
- Check out this calculator to see what the potential savings would be.
- For answers to Frequently Asked Questions click here