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What is a Standalone® Spending Account?

By: Benefits by Design | Wednesday February 8, 2017

Updated : Thursday June 18, 2020

Short answer? Standalone can pretty much be whatever you want it to be.

Employers can choose to incorporate a variety of Spending Account options to create a comprehensive solution that provides cost-containment, flexibility, and employee choice.

What is a ‘Spending Account’?

Think of a Spending Account like a bank account. It’s an account full of money, the amount being determined by the employer, for employees to spend on eligible expenses. The amounts reset with each new benefit year, and the dollar amount can be accessible to employees on an annual, semi-annual, quarterly, or monthly basis.

Spending Accounts provide employees with the ability to choose where to use their benefits dollars, empowering them to prioritize and individualize their coverage, while also providing cost-containment to employers, who will be able to accurately budget for their total benefits spend.

For example, an employer with five employees, each with $1,000 annually in total Spending Accounts options, will have a maximum benefits spend of $5,000/year (plus any applicable taxes and administration fees — but even that can be accounted for).

There are a few different types of Spending Accounts that can be combined into a Standalone plan: a Health Care Spending Account (HCSA), a Wellness Spending Account (WSA), or a combination of the two, which we have creatively dubbed the Combination Spending Account!

Health Care Spending Account (HCSA)

A Health Care Spending Account (HCSA) is a tax-effective way for employers to cover employees for eligible health and dental expenses. Employers determine the amount they would like to spend per employee and whether employees can carry over unused funds as part of their plan design. Employees pay for products and services themselves then submit expenses for reimbursement. Best of all, reimbursements are tax-free!

Typical expenses covered by an HCSA include glasses, massage therapy, dental services, and prescription drugs plus much, much more!*

HCSAs are regulated by the Canada Revenue Agency (CRA), who determine what is eligible for claiming. You view the full list of eligible expenses on the CRA website.

Wellness Spending Account (WSA)

Looking for a way to reward employees for living, healthy, active lives? A Wellness Spending Account (WSA), sometimes known as a Personal Spending Account (PSA), allows employers to reimburse employees for expenses related to personal wellness. Reimbursements to employees are a taxable benefit.

Typical wellness expenses include: gym memberships, personal training, vitamins – think anything that helps employees be healthy and well! As the employer, you decide what you cover.

Combination Spending Account

Looking for additional ways to offer a choice to your employees? Combine the powers of an HCSA and WSA into a Combination Spending Account.

Employers can allocate a set amount of money for employees who can then determine how much of that total will go into each Spending Account. This option provides even more employee choice and flexibility!

For example, if an employer offers $1,000 in a Combination Spending Account, each employee will be able to determine how much of that $1,000 goes in each account.

So if an employee really values their HCSA and the health and dental coverage it provides, they could elect to put a larger portion of their $1,000 allotment in that account, rather than their WSA. Alternatively, if an employee valued their WSA coverage and the extra perks and benefits it provides, they might choose to put more money into that account! It’s totally up to them.

Why Would Employers Choose a Spending Account Over Traditional Benefits?

Great question!

Actually, there’s no reason for an either/or benefits plan — employers can actually have the best of both worlds by combining a Spending Account solution like Standalone with their traditional, fully insured benefits.

This combination creates an incredibly comprehensive plan, bringing employees all the benefits of a fully-insured plan, such as Life and Disability Insurance in cases of serious accidents or loss of life, while also providing them flexibility and choice in what to spend their benefits dollars on through a choice of Spending Accounts.

Almost Any Business is Eligible for Standalone

One final advantage for Standalone Spending Accounts, which may be of particular importance for small businesses, is that Standalone has very minimal eligibility requirements.

In fact, the only requirement is that your business be incorporated!

This makes it an excellent option for businesses who may not yet qualify for traditional, fully-insured plans which often have more stringent eligibility requirements, including number of employees, amount of premium being collected, hours worked by employees, and more.

All Standalone Spending Accounts include:

Recent demographic and industry trends are proving the value of Spending Account solutions like Standalone.

Learn more about the shifting needs and demographics of employees!