When employers are looking to provide a unique benefit offering to employees, the conversation of “total rewards” is reviewed.
Total rewards recognizes that employee motivation and satisfaction are derived from a range of diverse needs and can be best supported by bundles of different reward components.
Total rewards can be classified as the following:
- Cash compensation (base pay, short and long term incentives)
- Employee benefits – help protect employees from the financial risks inherent in daily life
- Relational returns – psychological returns employees believe they receive in the workplace (recognition, status, security, challenging work, learning opportunities, team with great co-workers)
Benefits come in all forms of products, variances, and coverage. Often when the driver is flexibility for the employee and cost considerations for the employer, the conversation of a Health Care Spending Account (HSA) comes up.
- Cost – The employer decides on an allotment per employee for the calendar year. This amount is reviewed annually. As it’s a set amount, the employer knows the financial risk to the company and can budget accordingly.
- Employees have the flexibility to use the funds for whatever is needed most for them and their family. Some prefer extra dental benefits, others prefer more massages. There are very few restrictions, unlike traditional plans which have cost sharing or maximums.
How Do Health Care Spending Accounts Work?
Health Care Spending Accounts can be added to a traditional benefit plan or used as stand alone benefits. We recommend that an HSA be added to a traditional employee benefits plan in order to ensure that catastrophic coverage is in place for death, disability, out of country claims, and unexpected health costs.
The feedback from both employers and employees on the implementation of an HSA has been positive and as a result, they are gaining popularity.
Here is some of the feedback:
- An HSA attracts and retains great employees with a benefit plan that will fit their needs and provide peace of mind.
- It provides an offering that sets the company apart from their competition.
- It supports the growth of the company by helping to stabilize the cost of a benefit plan.
- It encourages greater employee engagement and a higher appreciation of the benefit plan.
- Flexibility provides the diverse coverage needed for each employee.
The Bonus: When employers allocate a per employee budget, they have the option to provide employees with a Wellness Spending Account in addition to the Health Care Spending Account.
What is a Wellness Spending Account?
A Wellness Spending Account is similar to a Health Care Spending Account in that an annual amount is allocated to be spent as the employee desires. However, the type of expenses which can be reimbursed relate to personal wellness items such as:
- Fitness classes, personal trainer, gym membership
- Fitness equipment, sports equipment, bicycle, heart rate monitor
- Child care, elder care, First Aid, CPR
- Hobby and general interest classes, tuition, books, musical instruments
- Nutritional counselling, vitamins, health assessments, weight loss program
- Legal services, financial services, premiums on individual insurance
Employers who wish to offer both types of plans may offer a set annual budget for each account or a set total budget for both, allowing the employee to fix the percentage for each type on an annual basis.
Unlike HSA's, which provide a tax-free benefit to employees and a tax-deductible expense to the employer, Wellness Spending Accounts are a taxable benefit to employees although they remain a tax-deductible expense to employers.
In conclusion, as the generational composition of the workforce evolves, combining the HSA and the WSP allows employees greater flexibility and choice. This provides higher levels of satisfaction and helps to attract and retain your firm's most important asset.
But in order to get the most out of these programs, it’s important to ensure you have an advisor that can fluently speak to the various factors, including taxation, and the positive and negative aspects prior to implementation.