Cost Plus Plans provide TAX PREFERRED and COST EFFECTIVE Health & Dental benefits for business owners!
Think of a Cost Plus Plan as a “little gold nugget” that has been offered to you by Canada Revenue Agency. All you have to do is know what it does and how to use it. Thousands of business owners across Canada use their Cost Plus Plans every day to provide 100% coverage for their family health & dental benefits while being able to deduct 100% of the expenses through their companies! Win-win!!
Let us explain to you in a comprehensive manner, how you can experience approximately 30% savings using a Cost Plus Plan as opposed to paying premiums into a traditional benefit plan.
How does a Cost Plus Plan work?
A Cost Plus Plan allows for reimbursement of eligible medical and dental expenses which otherwise would have been payable by the individual with after tax dollars. A Cost Plus Plan usually replaces a standard medical or dental plan as a stand-alone program. It also can be offered as a component of a flexible benefit plan or as a complement to a traditional group insurance plan and can be used to offset any expenses that have not been covered under those types of plans.
Premiums for such a plan are deductible for tax purposes and the reimbursement to the employee for those services is considered to be a non-taxable benefit in accordance with Interpretation Bulletin 339R2 dated August 8, 1989, which reads as follows:
“Under a Cost-Plus Plan an employer contracts with a trusted plan or insurance company for the provision of indemnification of employee’s claims on defined risks under the plan. The employer promises to reimburse the cost of such claims plus an administration fee to the plan or the insurance company.” “Provided that the risks to be indemnified are those described in paragraphs (a) and (b) of the definition of “private health services plan” in subsection 248 (1), such a plan qualifies as a Private Health Services Plan.”
In the above bulletin, “employer” refers to the Corporation and in CRA’s view, is a totally separate entity from you, even though you are the “active” owner of the company. Therefore, it makes sense that a Cost Plus Plan could be implemented for the “owner” in the same manner that it would be for an “employee” that would be hired to do the same job as the owner.