Little Life Hack - Optimizing Health Spending vs. Wellness Accounts

If your employer offers a health spending and wellness accounts, it's very tempting to make sure you have some money in the wellness account side so you can cash that money out for various sporting activities or other equipment that we love, however there is a better way to take advantage of that money.

Any money that you put into the Wellness account is taxed at your marginal tax rate. So if you get $500 a year, you are going to pay at least $100 in taxes (likely more!). If you put it in your Health Spending Account (HSA) all that money remains tax free so you have access to the full $500. However there are more restrictions on what you can use that money on; it has to be medically related and on your insurance's approved list. One tip that I recently learned is that you can submit your payments for the insurance plan as Health Spending Account expenses, which allows you to get back all of that money tax free (unless of course you are one of the lucky ones that your employer pays 100% of your insurance premiums).

How do you do this? You get your HR department to fill out a form similar to this one: HR Form and then you fill out one similar to this: Reimbursement form and send it off to your insurance company. The links provided are the ones I used for Alberta Blue Cross. Check with you insurance company to see if they have ones you can use.

And then wait a couple of weeks and voila, whatever is left in your HSA will magically be deposited into your bank account to spend it on whatever you would have used your wellness account for, but tax free. Or you could spend it on anything else you need. Or maybe even add it to your TFSA or RRSPs if not maxed out yet.

We ended up using more of our HSA account than we had in previous years due to some dental bills, but this little effort means a reimbursement of about $140 that was remaining in the account. My annual premiums are more than $500 so we theoretically could get it all back, tax free, each year.

At my previous employer they gave the option of depositing it directely into your RRSP if you had unused space so I just did that. This is just another option for decreasing taxes if you really wanted some money in your wellness account for a new bike or running shoes. Heck added bonus, you don't need to provide receipts so you could even get a used bike and actually keep the difference!


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