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Designing Wellness Accounts: Easy reference guide

For many employees entering the work force for the first time, traditional employee benefits can appear to be rigid and focused on treatment of disease rather than disease prevention.

But for employers, who may have more of a traditional view of employee benefits and compensation, wellness accounts may appear to be frivolous and lack any kind of return on investment.

Bridging the gap between employee desires and the types of benefits investments an organization is willing to make can be complex. In this reference guide, we wanted to equip you with some knowledge for the next time someone asks if your benefits program covers gym memberships.

1) What is a Wellness Account?

Wellness accounts are very flexible because they are taxable to employees. If an employer wants to reimburse employees for the cost of teeth whitening, daycare, bus passes, or haircuts, all of these things can be incorporated into a wellness account.

Most companies choose to make an investment into wellness accounts as an expression of their values and culture. If you want your staff to use public transportation, reimburse bus passes. If your benefits experience is reporting high utilization of high blood pressure medication, allow gym memberships and fitness classes to be claimed.

2) What is the difference between a Wellness account and Health Spending Account?

Wellness accounts are taxable to the employee, just like their income. Health Care Spending Accounts are not reported as taxable benefits to the employee, so it is an extremely tax efficient method of compensation. Health Spending Accounts are governed by Canada Revenue Agency, so the medical and dental items that can be reimbursed.

3) How can a Wellness account be designed?

Employers have a lot of flexibility when it comes to designing wellness accounts.

  • Benefit amounts: All employees can get the same amount or they can get different benefit amounts based on class, single/couple/family status, tenure within the organization, or role.

  • Benefit allocation: Because health spending account claims are billed as they are incurred, some organizations try to manage cash flow by allocating benefit amounts throughout the year. Benefits can be allocated annually, semi-annually, quarterly, or even monthly depending on the carrier.

  • Coverage amount: Some employers want employees to have some skin in the game when it comes to investments in their wellbeing. You can consider offering to cover a certain percentage of any eligible claim (cover 80% of a gym membership instead of 100%).

  • Unused benefit amounts: You can choose to have unused benefit amounts from the prior benefit year forfeit if left unused. You may also choose to

4) Can I have both a Wellness account and a Health Spending Account?

Yes! There are a few different ways that you can offer employees both non-taxable Health Spending Accounts and taxable Wellness Accounts.

Some employers divide their investment into two pools of money, so that every employee would have both a Health Spending Account and a Wellness Account. The message this sends to employees is that you as an employer see value in each of these types of investments into your team’s wellbeing.

You can also offer employees the option to choose how a single amount of money is divided between those two pools of money. For example, employees are given $1,000 per year. One employee may choose to put the whole amount into a non-taxable wellness account to pay for ski passes. Another employee may choose to split the $1,000 between the two accounts based on their needs.

This personalization of benefits allows employees to choose what is most important to them while maintaining your benefits budget.

Let us know if we can help design your wellness plan or tweak your existing benefits to introduce or modify how your fixed investment in a Health or Wellness plan is handled.


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