PERSONAL spending account (Psa)
WHAT IS A PSA?
It’s a pre-determined amount that can be allocated to an employee’s choice of health and wellness expenses that aren’t covered by other benefit plans or Health Spending Account (HSA).
In the industry, you may see a variety of product names such as flexible spending account (FSA); wellness spending account (WSA) or taxable spending account (TSA), for items such as ski passes and gym memberships.
WHY IT’S IMPORTANT?
Today’s employees are facing growing challenges, from navigating stressful commutes to maintaining a work-life balance. As a result, they are even more interested in their physical and mental health, and they want benefits and perks that are relevant to their unique lives. A PSA can deliver the care and flexibility that employees need, leading to better recruitment, retention and productivity levels for you. A PSA makes it easy for companies to offer a more robust employee-rewards package, without the added administration.
how does it work?
It’s simple: Employees personally manage their wellness-related spending, focusing on areas that are most important to them, while the Employer manages the available coverage and overall business costs.
As plan sponsors, they have many choices around the PSA benefit:
They can offer it to plan members only, or plan members and eligible dependents (in this case, plan sponsors also choose their preferred definition of a dependent).
They determine the amount of spending – any amount between $100 and $10,000 per plan member, per year.
They decide if unused credit can be carried forward for up to one calendar year (the Credit Carry-Forward option) or if unused credit is forfeited.
what’s covered?
A standard PSA comes with comprehensive Health and Fitness coverage, which covers products, services and expenses that support the general well-being of plan members: from nutrition, stress and sleep management to Gym, clubs and sports-league fees.
If desired, plan sponsors can also add any of these nine optional coverages to meet their company’s and employees’ specific needs:
Alternative Health Therapies – expenses related to natural and non-prescription healing therapies and health practitioners.
Financial/Legal Services – expenses that support overall financial health and peace of mind.
Life/Work Integration – expenses related to a plan members’ unique work/life needs, such as child-, family- and elder-care costs.
Pet Care – expenses associated with kennelling, training and veterinarian fees, licensing and more. Household Services – expenses for services provided by a non-family member, such as housekeeping, snow removal and landscaping.
Commuting – expenses around monthly parking, transit pass, cab fares, and so on.
Education, Professional Development and Technology – expenses related to professional development through continuing education.
Dental – expenses not covered elsewhere (and that do not qualify under the Income Tax Act), such as dental-hygiene products, home bleaching kits, denture cleaners and adhesives, etc.
Sustainable Living – expenses associated with minimizing carbon footprint, including solar- and wind-energy products, composters and rain barrels, and bike-sharing membership fees.
how are PSA’s funded?
PSAs operate on the calendar year, from January 1 to December 31. To fund accounts, plan sponsors simply provide a flat amount – anywhere from $100 to $10,000 – per member, per year. For convenience, plan sponsors can follow a remittance schedule that matches their core benefits plan (usually monthly).
What’s the grace period?
Plan sponsors can determine what the year-end grace period is for submitting claims: zero or 30 days.
What are the tax implications to plan members?
PSA claims reimbursements (including those incurred by any dependents) are a taxable benefit to the plan member. While annual tax reporting is the responsibility of the plan sponsor, The Co-operators will provide all plan sponsors with a member-level claims report to use for payroll-related deductions and tax reporting for the employee.
How are claims managed?
On the first day of the fund year, plan members are given access to their full annual amount. At any time, they can access their account balance for the current year. As claims are paid from the account, PSA balances are updated – and can be easily viewed – on Benefits Now for the plan member.
When the 12-month Credit Carry-Forward option is selected, unused funds will automatically revert to the plan sponsor at the end of the second year. If the option is not selected, funds are forfeited at the end of the year.