Private Health Services
Plan - Frequently Asked Questions
What is a Private Health Services Plan?
A PHSP is a tax strategy that
enables you and/or your employees to legally expense 100% of
legal medical and dental expenses. To access a PHSP requires
an agreement between a business owner or an organization and
a third party Benefit Administrator.
Who is eligible?
· Self-employed taxpayers
such as sole proprietors, partners, agents, salesman, unincorporated
companies, and limited companies whose business provides their
primary source of income (over 50%) for the fiscal year or income
from other sources does not exceed $10,000.
· Organizations with an existing Group Insurance Benefits
Plan that would like to “top up” their current plan.
If you are unsure whether you
are eligible please feel free to contact W.D. Cole Insurance
Services Ltd. personally to discuss your business.
How does the PSHP work?
1. To ensure your PHSP costs
will be tax deductible the plan must be purchased through a
third party Benefit Administrator.
2. The Benefit Administrator establishes an account (similar
to a bank account) with the tax-free contribution for the year.
a. For unincorporated or self-employed taxpayers PHSP premiums
will be deductible to a maximum of $1500 for each individual
and spouse, and $750 for each child under age 18.
b. For incorporated organizations there is not any limit to
the amount that can be contributed.
3. To receive your tax-free money you submit your claim and
receipt for your medical and/or dental expense to the Benefit
Administrator.
4. This expense can now be claimed on your income tax the same
as an RRSP contribution. However, a deduction for PHSP coverage
cannot be claimed as a medical expense tax credit.
5. The account can never be overdrawn.
6. Any remaining contribution at year-end is carried forward
for the next 12 months.
7. If after 12 months the carried forward contribution still
exists the money reverts back to the organization.
8. Equivalent PHSP coverage must be extended to all full-time
arms length employees
How does a PSHP save
money?
Significant tax savings
Currently most people are paying for their medical and dental
expenses with income that has been taxed.
For example if you needed to
pay $500 for glasses you would have to earn approximately $635
to $700, depending on your tax bracket, to have the $500 after
taxes to be able to pay for the glasses.
You can now change your medical
and dental expenses from an after-tax personal expense to a
tax-free business expense. Depending on your tax bracket, you
will save from $.60 to $1.50 of income tax for every dollar
you are currently spending on these expenses.
Tax savings for you and
your business or organization
Instead of using taxable income
to pay for medical and dental expense we suggest expensing this
cost through a PHSP. This has provided four real benefits for
our clients:
-
The contribution provided
by your business or organization is a legal business tax deduction.
-
Using tax-free money for
medical and dental expenses has significantly reduced the
overall dollars spent on these expenses for employees.
-
The tax savings has provided
some families with extra money enabling them to access medical
and dental services that were previously unaffordable.
-
The Income Tax Act provides
a wider scope of allowable medical and dental expenses in
comparison to group insurance plans (e.g.) orthodontic programs
and laser eye surgery.
What is covered?
Paramedical services, psychologists,
speech therapy, home care nursing, prosthetic appliances, durable
medical equipment, prescription drugs, dental care, vision care,
laser eye surgery, fertility treatments, Viagra and more.
A full listing of the allowable
expenses under the Income Tax Act is available from W.D. Cole
Insurance Services Ltd.
Do I have to buy Life
Insurance and Disability Insurance to qualify for the PHSP?
Life Insurance, Disability Insurance
and Critical Illness are optional benefits. If you do not already
have these benefits W.D. Cole Insurance Services Ltd. would
be pleased to provide you with more information and discuss
your needs.
What services will W.D.
Cole Insurance Services Ltd. provide?
-
PHSP agreement documentation
-
Quarterly statements on your
account
-
Annual review statement for
your tax files
-
Advice on medical & dental
claim adjudication
-
Dental claims payment service
-
Excess medical adjudication
claims service Benefit summary booklets
We will do everything we can
to assist you in claiming legitimate medical and dental expenses
to reduce your income tax.
How do I get started?
1. We need a completed enrollment
card
2. We need your medical and dental budget
3. Your payment in advance for first and last months’
premium
4. Start-up date
5. Automatic bank debit authorization with voided cheque
Upon completion of these steps
a PHSP agreement will be forwarded for your approval.
What are the administration costs?
-
A one-time investment of
$200
-
$2.50 per month per employee
-
A 12% commission on claims
We recommend you confirm with
your accounting professional that you or your organization qualifies
for a PHSP.
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