What happens to the unused eHSA contributions at the end of a policy year?
Unused contributions from the first plan year are not lost – they carry forward to the second plan year, and if not used by the end of that plan year are forfeited. The forfeited contributions cannot be returned directly to the employee per Revenue Canada’s rules. However, the employer receiving the forfeiture amounts could deposit the amounts received into the employee’s RRSP, or pay them out as a new bonus. In either case the employer receives a tax deduction for the business expense to offset the receipt of the forfeitures that was written off two years earlier and the employee receives a new benefit. Unfortunately Revenue Canada has advised that sole proprietors or contractors are not eligible to receive the forfeiture of unused eHSA funds at the end of each second plan year. Sole Proprietors are limited by the Income Tax Act to deduct $1,500 for themselves, $1,500 for their spouse and $750 for each child from their business income as qualifying medical insurance premiums. Individu
