HSAs are self-insured health plans arranged by employers for their employees residing in Canada.  They provide a way that small businesses can provide tax-free health and dental benefits to their employees (and their employees' family members).  This makes the HSA appear to be an extremely attractive and cost-effective way of getting and providing health and dental benefits.

​

However, a valid HSA plan must conform to Private Health ServicePlan rules.  The information below clarifies the rules on what are acceptable Health Spending Accounts.

​

Incorporated businesses, including shareholder employees and all other corporate employees, are eligible to participate in an HSA. Corporations with as few as one employee can be eligible as well.

​

In the case of unincorporated businesses or sole proprietors, the owner and their employees are eligible if the owner has at least one arm's-length employee.

​

If the business is a sole proprietorship with no arm's-length employees, the CRA does not conder an HSA to be a private health services plan and any costs incurred for amounts paid to this account are not deductible business expenses.

​

Source 

Canada.ca\Canada Revenue Agency CRA\CRA Newsroom