From Investments to Taxes part 3
Seeing how yesterday was the deadline for most Canadians to file their taxes, I guess I should finish up my discussion on Private Health Service Plans (PHSPs) and how they can be beneficial as an alternative to employee group plans.
I have discussed how a PHSP can be beneficial for a sole proprietor/one man incorportated company – some of those same benefits can be translated to a small business with employees.
With a group plan you pay premiums every month – even if your employees are not using the plan. Also your premiums increase based on the claims experience with your group – generally all it takes is one employee to make significant claims to cause an increase for small groups. The other thing to consider for small group plans is that you generally will not have enough staff to cover major dental expenses such as crowns, caps, bridges, dentures, and orthodontia.
The advantages with a PHSP is that you set the limits as to how much each category of employee is allowed – say $1500/year, the owner can (and typically does) have a maximum of $5000 or more. You can create dozens of different categories based on family size, employment status, employment position (F/T or P/T), seniority etc. This employee is allowed to spend these dollars on whatever medical and dental expenses they want – even MRI’s, laser eye surgery, and even their own individual Blue Cross plan(or similar).
The owner then know exactly what the health costs will be at a maximum – if the full amounts are not used by the employees – they can be rolled over (for one year only) or they are lost. This way if there is significant claim experience – the costs will not increase. Plus the unused dollars can be eventually returned to the owner!
It should be mentioned that there are optional programs available for prescription drug coverage, hospital, ambulance, accidental dental, travel, life and disability insurance – for the “what ifs” – but for everything else you can use the PHSP.
Finally, just like premiums for your health and dental portion of your group plan – any dollars that are used by the employees are tax dedutible for the owner and the benefits are received tax free by the employee.
In closing a PHSP can offer small business owners an opportunity to offer their employees a benefits package without having to worry about the costs getting out of control – plus the employees can use the dollars on items that are actually going to use.
Have a great weekend everyone – looks like spring has finally arrived in Edmonton! 
Rhett