In today's competitive landscape, companies are continually seeking innovative ways to attract and retain top talent. One effective strategy is to enhance employee well-being through comprehensive benefits packages. Among these, wellness spending accounts (WSAs) have emerged as a valuable tool for fostering a healthier, more engaged workforce.
This blog aims to educate HR professionals, benefits managers, and company decision-makers on the advantages, eligible expenses, and tax implications of WSAs in Canada, helping them make informed decisions about implementing such programs in their organizations.
What is a Wellness Spending Account?
A wellness spending account (WSA) is a type of employee benefit that provides funds for a variety of wellness-related expenses. These accounts are designed to support employees' physical, mental, and emotional well-being, encouraging them to engage in activities that promote a healthier lifestyle. Unlike traditional health insurance plans, WSAs offer more flexibility and a broader range of eligible expenses, allowing employees to tailor their wellness activities to their individual needs and preferences.
Difference Between HSA and WSA
Before delving into the benefits of WSAs, it's important to distinguish between health spending accounts (HSAs) and WSAs:
- Health Spending Account (HSA): An HSA is primarily used to cover medical expenses not included in a traditional health plan, such as prescription drugs, dental care, and vision care. HSAs are typically funded by the employer and are tax-deductible for the company.
- Wellness Spending Account (WSA): A WSA covers a wider array of wellness-related expenses that may not be strictly medical. This can include fitness programs, nutrition counselling, mental health services, and even hobbies that contribute to overall well-being.
Eligible Expenses for a Wellness Spending Account
WSAs are designed to cover a broad spectrum of wellness-related expenses, enabling employees to choose what best supports their well-being. Some common eligible expenses include:
- Fitness and exercise programs: Gym memberships, fitness classes, personal training sessions, home exercise equipment and workout apparel.
- Mental health services: Counselling with non-HSA eligible practitioners, stress management programs, and mindfulness workshops.
- Alternative health treatments: Craniosacral treatments, reflexology, reiki, or holistic medicine.
- Recreational activities: Sports memberships and equipment fees, yoga classes, and hobby-related expenses that contribute to physical and mental well-being.
- Health and wellness apps: Subscriptions to meditation, fitness tracking, and mental health apps.
- Daycare and childcare services: Infant and toddler care, preschool programs, after-school care and special needs services.
- Parking and transit fees: Bike-share programs, single or monthly transit passes, parking passes (hourly, daily, weekly or monthly) and parking fines.
Wellness Spending Accounts are Considered a Taxable Benefit in Canada
Wellness Spending Accounts are considered a taxable benefit, meaning amounts received by employees must be reported as income for tax purposes. Unlike Health Spending Accounts, where eligible benefits must meet the CRA's criteria for medical expenses, the taxable nature of WSAs allows employers greater flexibility in determining approved expenses. If a WSA is administered through a carrier, they usually provide a standard list of wellness expenses, but you can still control how broad or narrow you prefer the offering to be. Please note that in Quebec, HSA is also a taxable benefit.
Employers must ensure that WSAs are administered in compliance with CRA guidelines. Consulting with a tax professional or benefits advisor can help ensure that the WSA is set up correctly and that eligible expenses are clearly defined.
Implementing a WSA Yields Significant Benefits
Implementing a WSA can yield significant benefits for both employees and employers. Here are some key advantages supported by research and studies:
- Enhanced employee well-being: By providing funds for wellness activities, WSAs empower employees to take proactive steps toward improving their health. This can lead to reduced stress, better physical fitness, and improved mental health, contributing to a more positive and productive work environment.
- Increased employee engagement and retention: Offering wellness benefits demonstrates that the company values its employees' well-being. This can boost morale, increase job satisfaction, and reduce turnover rates. A study found that organizations with comprehensive wellness programs experienced a 25% reduction in employee turnover.
- Reduced healthcare costs: Healthier employees are less likely to require extensive medical care, which can result in lower healthcare costs for both the employee and the employer. Companies with effective wellness programs saw an average of $3.27 in savings for every dollar spent on wellness initiatives.
- Improved productivity: Employees who are physically and mentally healthy are generally more productive. A study published in the Journal of Occupational and Environmental Medicine found that employees participating in wellness programs had a 25% reduction in absenteeism and a 10% increase in productivity.
- Positive company culture: WSAs can help foster a culture of health and wellness within the organization. When employees see their peers engaging in wellness activities, it can create a supportive environment that encourages everyone to participate and prioritize their well-being.
Conclusion
Offering wellness spending accounts is a strategic investment in the well-being of your employees and the overall success of your organization. By providing funds for a wide range of wellness-related expenses, WSAs empower employees to take control of their health and engage in activities that enhance their physical, mental, and emotional well-being. Implementing a WSA not only demonstrates a commitment to employee well-being but also positions your company as an attractive and forward-thinking employer in the competitive job market.