A Technical Guide to Our HSA for Accountants

Hiveworks enables an incorporated business to set up a Health Spending Account (HSA) that allows the corporation to reimburse the business owner for eligible personal healthcare expenses. Structured as a Private Health Services Plan (PHSP), the Hiveworks HSA is designed to comply with CRA requirements and provide tax-efficient benefits.

Hiveworks acts as the plan administrator, managing setup, compliance, and claim reviews. Every submitted claim is assessed against CRA guidelines to ensure eligibility. The process is fully digital, streamlined, and built for incorporated professionals seeking a compliant solution.

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How Hiveworks Works

Plan Setup: The client agrees to Hiveworks’ service agreement and opens their plan. The plan activation date becomes the effective start date for claim eligibility.
Expense Incurred: The business owner or dependant pays out-of-pocket for an eligible health expense.
Claim Submitted: A dated receipt is uploaded through the Hiveworks portal.
Claim Reviewed: Hiveworks screens the claim against CRA’s Medical Expense Tax Credit (METC) eligibility guidelines and approves or denies it.
Employer Funds the Claim: Once approved, the business is invoiced for the claim amount.
Reimbursement Issued: Hiveworks reimburses the employee directly to their personal bank account.

Hiveworks also provides a downloadable export feature for simplified bookkeeping.

Further details on how it works.

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Definition of a PHSP

Per the CRA, to be considered a Private Health Services Plan (PHSP), all of the following conditions must be met:

All expenses covered under the plan are:
- Medical and hospital expenses eligible under the Medical Expense Tax Credit (METC) OR‍
- Expenses connected to a medical expense (e.g., medically necessary travel) and incurred within a reasonable time after the medical event

“All or substantially all” (90% or more) of the benefits paid relate to eligible medical expenses under the METC

The plan is in the nature of insurance and includes all of the following legal elements:
- An undertaking by one person
- To indemnify another person
- For an agreed consideration
- From a loss or liability in respect of an event
- The happening of which is uncertain

The plan provides coverage only to the employee, the employee’s spouse or common-law partner, or any member of the employee’s household with whom they are connected by blood relationship, marriage, or adoption

CRA references:

Private Health Services Plan definition
Interpretation Bulletin IT‑339R2 - Meaning of “Private Health Services Plan”
2022 CALU Q10 - CRA Technical Interpretation (2022‑0928901C6)

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How Hiveworks Meets the Above Definition

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Requirement 1: All expenses covered under the plan are:

Medical and hospital expenses eligible under the Medical Expense Tax Credit (METC) OR
Expenses connected to a medical expense (e.g., medically necessary travel) and incurred within a reasonable time after the medical event

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Hiveworks limits reimbursements to expenses that are eligible under the CRA’s Medical Expense Tax Credit (METC). These include medical, dental, vision, mental health, prescription drugs, and other qualified healthcare services.

Only expenses from the following two CRA guides are permitted:

Connected expenses, such as travel related to medical treatment, are only reimbursed if they meet CRA’s criteria. The expense must be directly related to an eligible medical service and incurred within a reasonable time following that service.

Each claim is reviewed to ensure eligibility under CRA’s Medical Expense Tax Credit (METC) guidelines, with supporting receipts required for all submissions. This ensures that all expenses reimbursed through the Hiveworks HSA fall within the allowable scope of a PHSP.

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Requirement 2: “All or substantially all” (90% or more) of the benefits paid relate to eligible medical expenses under the METC

^‍Hiveworks enforces this by allowing only METC eligible expenses to be submitted. Similar to the above, all claims are reviewed against CRA eligible expenses and practitioners, and ineligible expenses are rejected.

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Requirement 3: The plan is in the nature of insurance and includes all of the following legal elements:

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i. An undertaking by one person

Hiveworks requires that a single legal entity (the corporation) bear full responsibility for the plan. Once the plan is activated:

The sponsoring corporation cannot be changed mid-year
Only that corporation may fund claims

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ii. To indemnify another person

Hiveworks requires the corporation (plan sponsor), during plan setup, to formally establish a legal obligation to reimburse eligible medical expenses incurred by the employee (including their spouse and dependants), up to a fixed annual limit.

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iii. For an agreed consideration

The corporation is the plan sponsor and agrees to provide a defined benefit (the Health Spending Account) to the employee. The employee performs active work for the business and is compensated in part through this health benefit.

The agreed benefit is defined clearly through an annual reimbursement limit (up to $15,000) set during onboarding and enforced through the platform. It cannot be changed mid-year and resets annually.

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iv. From a loss or liability in respect of an event

The plan only compensates the employee after they’ve experienced a real financial loss or liability due to a qualifying medical event.

The employee or dependant must:

Pay out-of-pocket, creating a financial liability
Validate the liability by submitting a dated receipt through the Hiveworks platform
Ensure the event qualifies based on CRA’s METC eligibility rules

Only then does the corporation (plan sponsor) reimburse the employee. This ensures the plan responds to an actual loss or liabiliity triggered by a legitimate medical event.

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v. The happening of which is uncertain

If a qualifying medical event occurs, the employee may submit a claim and receive reimbursement. If no such event occurs, no benefit is paid. The plan only covers uncertain, future events.

The employee receives no automatic benefit
Reimbursement only occurs if a qualifying medical event happens and results in an eligible expense
- The employee must pay out-of-pocket, submit a dated receipt, and have the claim reviewed against CRA METC eligibility
If no eligible expense occurs, no benefit is paid
Expenses incurred prior to the plan start date automatically do not qualify for reimbursement

This ensures the plan does not operate as a fixed allowance or guaranteed payout, it only provides value if and when an uncertain medical event occurs.

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Requirement 4: The plan provides coverage only to the employee, the employee’s spouse or common-law partner, or any member of the employee’s household with whom they are connected by blood relationship, marriage, or adoption

Hiveworks applies a conservative interpretation of this rule to ensure clarity.

Coverage is limited to:

A spouse (married or common-law), and
Children who are:
- Under 21, or
- Under 25 and enrolled in full-time post-secondary education, or
- Any age if physically or mentally unable to support themselves

Dependants must reside in the same primary household as the planholder.

It is the planholder’s responsibility to accurately identify and add eligible dependants to their Hiveworks plan during onboarding.

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Supplementary Requirement 1: Shareholder vs Employee Status

To qualify for a Hiveworks HSA, the planholder must be able to show they are an employee of their corporation, not just a shareholder.

The individual must:

Be actively involved in running the business
Receive at least a portion of their compensation as T4 income
Have the HSA outlined as a benefit in their employment contract

Receiving T4 income helps demonstrate the employer-employee relationship the CRA expects for a Private Health Services Plan (PHSP).

‍It is the corporation’s responsibility to confirm that the planholder meets these criteria during onboarding to ensure PHSP compliance.

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Supplementary Requirement 2: Number of Employees

The Hiveworks HSA is currently only available to corporations that do not have arm’s length employees.

This means:

The business owner must be the only employee with the exception of their spouse or dependants (who are legitimately employed and compensated)
If the corporation has additional arm’s length employees (non-family staff), Hiveworks’ current offering does not apply.

A Small Business PHSP is in development to accommodate multi-employee plans with appropriate per-employee allocations, class structures, and CRA-compliant administration.

It is the corporation’s responsibility to confirm that there are no arm's length employees at the time of onboarding to ensure PHSP compliance.

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Supplementary Requirement 3: Annual Limits

Each year, the plan owner must define their annual limit. The maximum annual limit is $15,000.

The owner‑set limit must be reasonable in relation to income and employment purpose. Industry guidance suggests it should fall within 10-15% of the employee’s salary. The limit should also align with what a comparably paid employee at another similar corporation might reasonably receive.

A limit that significantly exceeds this range could be viewed by CRA as a taxable shareholder benefit rather than a genuine employee benefit.

Hiveworks enforces a $15,000 cap to maintain PHSP integrity:

It aligns with widely recognized standards in the HSA/PHSP industry
It helps the employer control total cost exposure

The limit resets annually, and it can be aligned with the corporation’s fiscal year for convenience.

It is the corporation’s responsibility to ensure that the annual limit they select is reasonable in relation to the employee’s compensation and duties, to maintain PHSP compliance.

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Coordination with a Spouse who already has a Benefits Plan

Hiveworks can paired with other benefits plans to reimburse:

Out-of-pocket portions not covered by the spouse’s group plan
Excluded or capped services such as massages, physio, or orthodontics
Health and Dental portion of premiums paid for the group plan (if not already claimed elsewhere)

CRA excerpt on insurance premiums:

Premiums paid to private health services plans - including medical, dental, and hospitalization plans - can be claimed as a medical expense, as long as 90% or more of the premiums paid under the plan are for eligible medical expenses.
Source: CRA - Premiums paid to private health services plans

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Still have questions? Contact us.

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