Health Spending Accounts (HSAs) and Private Health Services Plans (PHSPs) allow employees to be reimbursed for eligible medical, dental, and wellness expenses. Employers can structure plans to maximize tax efficiency while providing flexibility for employees. This guide explains carry-forward rules and claim submission.
1. Annual Limits: Use-It-or-Lose-It (CRA-Compliant)
- Each employee has a fixed annual benefit limit.
- Any unused funds at year-end cannot carry forward.
- Encourages employees to use benefits within the plan year.
Example:
– Year 1 Allocation: $1,000
– Used: $600
– Unused: $400 ❌ (forfeited)
– Year 2 Allocation: $1,000
2. Late Claims Submission (CRA-Compliant)
- Employees can submit claims up to 365 days after the service date.
- Expenses are applied to the year in which they were incurred, not the year submitted.
Example:
– Expense incurred: Dec 15, Year 1 ($600)
– Claim submitted: Jan 10, Year 2 ✅
– Expense applies to Year 1 limit
3. Non-CRA “Carry Forward Unused Limit” (Non-Compliant)
- Some plans allow unused limits to roll into the next year.
- ❌ Not allowed for incorporated employees under CRA rules.
- Could make employer contributions non-deductible or employee reimbursements taxable.
Visual Comparison Table
| Feature | Unused Limits | Late Claims |
| Carry over to next year | ❌ No | ✅ No, only claims submitted late |
| Applied to plan year | Year of allocation | Year expense was |
