WHAT IS A PHSP
WHAT IS IT?
In the 1998 Federal Budget, the Honourable Paul Martin improved a law (Section 248) that allowed businesses to pay for their employee’s dental and medical costs and deduct those costs. Then, by running these expenses through a third party Trust, the business could have the employee’s receive these benefits tax free – while avoiding group insurance company’s added ‘margins’.
These costs are either paid out directly to the medical practioner or are reimbursed to the employee directly, from the third party Trust.
This is an employee benefit that allows businesses to offer medical and dental coverage to their employees in a cost efficient and cost–controlled manner. Employers who are ‘employees’ by nature of their business being an incorporated company may take advantage of the plan. Incorporated one-man businesses may set up a plan without other employees. One person Sole Proprietors may do so as well, but with certain limitations.
This plan gives Cost Control to the business and Cash Control to the Employee – a ‘win-win’ situation for everyone in your business!!
WHAT CAN BE DEDUCTED?
Any medical or dental expense as allowed by CRA for the purposes of the Personal Medical Exemption.See the List of Eligible and Ineligible Expenses.
WHEN IS IT EFFECTIVE?
Plans may have their effective dates back-dated to the first day of the current month that the plan is set up in. There is no back dating to the beginning of the current year allowed by CRA.
WHAT DOES IT COST?
There may be a one time set up fee for the actual Trust. After that, the only charges are a claims fee, usually 10% of submitted claims. Some plans also charge a monthly administrative service charge of $5.00 to $10.00 per employee. These are all tax deductible and are in aggregate less than the 40% margin often charged by most group health and dental group insurance plans.
WHAT DOES THE THIRD PARTY TRUST ADMINISTRATOR DO?
The Administrator will administer the Trust for you. This includes keeping track of your benefit monies, how much an employee has used, adjudicating the claims and paying out the claims. The claims process is done directly with the employee under the terms of the plan as set by your business. Claims forms are sent by the employee directly to the Administrator and the cheques (or EFT direct deposit into your bank) are sent by the Administrator directly back to the employee.