If you are a Business Owner or Executive, your Company could pay for your uninsured Medical or Dental Expenses.
This includes things like Orthodontics, Major Dental, Laser Eye Surgery and other items that may not be covered under your benefit plan, as well as expenses in excess of plan limits.
This may also include excess Paramedical coverage (i.e. Chiropractor, Massage, Physiotherapy, Speech Therapy, Psychologist, etc), Glasses or Contact Lenses, and many other Medical and Dental items considered eligible under the Income Tax Act.
What is Cost Plus?
If you already have an existing employee benefit plan, Cost Plus is likely already available through that plan, allowing you to provide your key personnel with this valuable benefit. There is no additional cost to having the Cost Plus benefit, other than the administrative fees* and taxes incurred when a claim is made. Claims are not reflected in the group’s experience, so it doesn’t impact the pricing of your benefit plan.
Any legitimate Medical or Dental expense, as defined by CRA which is limited or not covered by your plan, may be eligible. Common examples are Paramedical amounts (Chiropractor, Massage, Physiotherapy, Speech Therapy, Psychologist, etc) in excess of the benefit plan maximums, Major Dental or Orthodontic coverage, Laser Eye Surgery, etc.
What is a Health Spending Account (HSA)?
Business Owners or Executives looking for an alternative to traditional plans, or to supplement their existing coverage, may be able to consider a Health Spending Account (HSA). An HSA is an account that is established to pay for medical and dental expenses for you and your family members.
These can be obtained on a standalone basis, or to supplement another health plan. Many people will bundle a self-insured HSA with Catastrophic Health Insurance for a cost-effective plan that still provides protection for significant expenses.
Click here to learn more or sign up for a HSA account.
EXAMPLE:
The child of an executive requires $3,000 of Orthodontic Treatment. The Benefit Plan covers Basic Dental coverage only.
ASSUMPTIONS:
- Marginal tax rate is 43%
- Cost Plus claim would cost $3,000 plus a 10% administration fee* ($300) and applicable taxes for a total of $3,300 (+ taxes)
- Corporate tax rate for this business is 15%
WITHOUT COST PLUS:
- Executive must earn $5,300 to have $3,000 after tax dollars to pay the expense
WITH COST PLUS:
- Business pays the Cost Plus claim with $3,300 (+ taxes) in corporate funds
- $3,300 is tax deductible for the business
- Executive receives $3,000 in non-taxable benefits
- With a 15% tax rate the net cost to the business after tax is only $2,805
THE RESULT:
With Cost Plus coverage, the cost to the executive is reduced to $2,805 and is paid for by the business. The expense has been paid for in a tax effective manner and the executive has received $3,000 in tax-free benefits.
Owners/Shareholders should consult their accountant or tax advisor for more details on how this benefit may apply to them. Taxation rules and interpretations are constantly changing and this example should not be taken as tax advice.
Note:
- Click here to learn more about CRA views on HSA accounts
- CRA may deem that the application of cost-plus for shareholders only may result in a taxable benefit and negate the benefits of a cost plus claim
