Private Health Services Plans or also known as PHSPs, is the number one alternative for Canadian small business owners to provide Hospital and Medical benefits to their employees inclusive of Extended Health, Dental and Vision AND receive Tax Preferential Treatment!
For small businesses, a PHSP enables the business owner to deduct 100% of their family’s health and dental expenses through their business creating a potential savings of more than 30%! It also allows for the owner to receive the benefit from the business 100% tax-free! Imagine not having to pay traditional plan premiums for benefit plans that offer only benefits and amounts that are pre-determined AND seldom used, but rather, having the ability to choose the benefits and the amounts you require – NO SQUARE BOX!! No premiums! Only spend on what you require! Only spend how much you wish to spend! You no longer pay into a program that you did not use!
For larger companies with employees, a Private Health Services Plan offers the same advantages as for a small business owner – the cost is fully deductible at 100% and the employees will receive their benefits 100% Tax Free! As well, implementing a PHSP has several additional advantages over a Traditional Employee Group Benefits Plan.
Here are the Top 10 Advantages for a Company to Implement a Private Health Services Plan:
1. The Company OWNS and CONTROLS the plan!
2. You can create a plan that suits your Company’s unique NEEDS & PHILOSOPHIES!
3. Provides significant COST CONTROL as it allows you to fully budget for your Annual Benefits expenses.
4. Plan design allows for unlimited FLEXIBILITY!
5. The Company can own a plan that will ATTRACT, REWARD & RETAIN the caliber of employees that they are searching for!
6. The Company can own a BENEFIT PLAN DESIGNED to BENEFIT 100% OF ITS EMPLOYEES, not just the sick or injured!
7. The company no longer need worry about premium rates being increased at the annual renewal due to usage or age factors since the Cost of a PHSP is fixed.
8. Private Health Services Plans DO NOT have PRE-EXISTING EXCLUSIONS from the plan!
9. Private Health Services Plans DO NOT have DEDUCTIBLES!
10. Traditional plans can be very complex and difficult to figure out coverage and claims eligibility – PHSPs are very UNCOMPLICATED! 100% coverage up to the Annual Funding on all eligible expenses.
Who Can Benefit from a PHSP?
-Business Owners, their spouses (including common law and same sex partners) and members of their households related to the Owner by blood, marriage or adoption.
– Employees, their spouses (including common law and same sex partners) and members of their households related to the Employee by blood, marriage or adoption.
– Survivors of employees. CRA regards PHSP coverage for surviving spouses and dependents of a deceased employee as “an extension of the non-taxable benefit received by the employee while actively employed”, and therefore not taxable to the surviving spouse or dependent.
– Retirees of a company. Employer-paid premiums to a PHSP on behalf of retirees and the reimbursement of eligible expenses under the terms of the plan, are not taxable benefits for the retirees.
– Shareholders. As long as the shareholder receives benefits from the plan as being actively engaged and not because they simply own the company, the tax treatments of the PHSP can apply. It is important to note in order for CRA to be willing to treat benefits paid to a shareholder as tax-free compensation and not shareholder benefits the following factors must be considered:
- The shareholder must be actively engaged in the business,
- All benefits must be reasonable in the circumstances,
and at least one of the following must apply:
- The benefits enjoyed by the shareholder must be comparable in amount and nature to what non-owner employees at similar firms with similar responsibilities receive,
- The benefits offered to the shareholder/employee must be part of a reasonable compensation package, or
- Shareholder and non-owner employees must be offered equivalent benefits. (Equivalent benefits does not mean that everyone in the firm must receive equal benefits – but employees in each group of equivalent responsibilities must receive equal benefits)
What Types of Expenses Are Eligible under a Private Health Services Plan?
Private Health Services Plans are amazing! They offer you the freedom of providing coverage for an extensive range of eligible expenses…no square boxes, no restrictions on the type of expenses you may require or how much you may spend on any particular service! 100% coverage! CRA provides a guide of Eligible Medical Expenses that are acceptable expenses through a Private Health Services Plan. Some expenses that may interest you and your family are:
– Prescription Medication to ensure the health of those you love.
– Access to all Medical equipment and apparatus prescribed or medically necessary such as Wheelchairs, Physiotherapy Equipment, Heart Monitors, Hearing Aids or even CPAP machines.
– Ambulance rides and Semi or Private Hospitalization.
– Professional Services that you would consider more Pro-Active or Holistic such as Massage Therapy, Chiropractic, Physiotherapy, Acupuncture, Naturopath and Podiatry.
– Access to necessary Medical Testing that have long waiting periods in the system such as MRIs.
– Access to additional Medical Investigation outside of the provincial health care system.
– All forms of Vision expenses including Laser Eye Surgery, Eye Glasses or Contacts, even Prescription Sunglasses.
– All services provided by your Dentist including Basic, Periodontics, Endodontics, Major (crowns and dentures) as well as Orthodontics.
What Type of Plans are Available Through a Private Health Services Plan?
Health Risk has been providing Private Health Services Plans to our clients since 2000 through several different plan designs as below! Simply click on the plan design that interests you and it will forward you to a comprehensive description of your chosen plan.
Are you Allowed to Offer Different Benefits or Funding Levels to Different Groups of Employees Under a PHSP?
YES! An Employer may want to give enhanced benefits to its key employees, those who make a greater contribution to the success of the business than the rank-and-file employees. Many times it is important to be able to offer Key Employees a sufficiently generous compensation package, including benefits, to attract and retain them. Also, it is not unusual for employers to seek out ways to reward long-term employees and their loyalty to the company.
CRA Interpretation 9505265, dated June 26, 1995 states: the fact that a PHSP has different annual maximum benefit limits for different employee groups does not disqualify it as a PHSP. CRA Ruling 9601643, dated 1996: a plan where the maximum benefit for each employee was 20% of that employee’s income was a PHSP, even though employees would receive different maximum levels of coverage.
It is imperative in the plan design of a PHSP that affords different levels of coverage to groups of employees that all employees within a specific category, MUST receive the same coverage as each employee within that category.
What is the Tax Treatment of a Private Health Services Plan?
For Employees: Employees will receive the Employer Contributions to their plan 100% Tax Free – the contributions are not added into their taxable income. However, in Quebec only, the employer contributions are included on the employee’s provincial (though not federal) income tax return.
For Employees Contributing to Their PHSP: The employee will pay contributions using after-tax dollars, and will not be able to deduct them. However, they may be able to count towards the METC. The METC is calculated using the lowest federal/provincial rate, but an employee pays tax on income at their highest marginal rate. Therefore, any benefit an employee derives from counting their PHSP contribution towards a claim for the METC will almost certainly be offset by the extra tax the employee pays on the salary used to make that contribution.
For Incorporated Business Owners: May deduct 100% of the contributions to a PHSP as business expenses along with the Administration Fees
A PHSP is an Insurance Plan:
There are many strict guidelines and conditions that are required to qualify a PHSP and therefore, it is imperative that when deciding to establish a PHSP for your business and your employees, that you work with an organization such as Health Risk Services to assist you with the establishment, organization and maintenance of your plan. We have a dedicated staff that are knowledgeable in both the guidelines and the claims adjudication of PHSPs, allowing you and your employees to be worry free about your plans eligibility and to focus on performing the business of your business!
At Health Risk we will work with you to create a PHSP plan design that will help you to ATTRACT, REWARD and RETAIN your valued employees while ensuring that the plan remains within CRA guidelines.
CALL US! WE ARE HERE TO HELP!
DISCLAIMER: Please be advised that the information on this web site is intended to present a broad variety of general information as simply and accurately for your knowledge as we possibly can. In no event does this information form part of or apply as a legal document. Therefore, please note that rules, conditions and industry practices discussed may be changed over time.