When Plan Sponsors and Admins ask, "When can I make changes to the contributions to the Health Spending Account for my Plan?" Our answer is "Sorry! You can't! Nope! Not ever!"
Come on! how silly would that be!?
We'd love to let you change contributions any time you like, but the reality is, we want to protect your business from any negative tax or employment-related implications and that means we follow rules set out by the CRA.
According to the CRA, changes to contributions are allowable under two conditions:
- On renewal of the Plan (the annual renewal period/date)
- Mid-Plan Year (therefore outside of the renewal period) if, and only if, there's been a life change event to reasonably justify changes to the contributions
Any recent changes to job status (i.e. changing from part-time to full-time?)?
Changes in the number of dependants (i.e have you had a baby?)?
Changes to spouse's coverage?
If you or any of your team have had any recent life change events, like the above-mentioned examples, you may be able to alter contributions outside of the annual renewal period.
The key is that the life change event needs to reasonably justify changes.
There's also a couple of exceptions to the general rule... we may be able to decrease contributions outside of the renewal period, and without a justifiable life change event if:
- The employees on the Plan acknowledge changes to contributions. Contributions are a part of an employee's remuneration and as such are explicity or implicitly tied to the employment agreement. Essentially we will want documentation to ensure employees agree to an aribitrary change so that the company is not subject to any negative implications. With an HSA Classic, we'll require specific acknowledgement from individuals affected.
- It's an individual Plan and the Plan Sponsor is the same person as the Plan Member and therefore is not making an arbitrary decision to change the contributions for arm's length employees, we’d be able to decrease the contributions.
The concept is tricky so if you have questions, just say email@example.com and we'll help you figure it out!