A Private Health Services Plan (PHSP) is a tax-deductible plan through which incorporated businesses and non-incorporated businesses (including sole proprietors) may provide health, dental and supplemental health benefits to their employees, employees’ families and even themselves.
Not only do PHSPs provide a tax-deduction for businesses, but they are 100% non-taxable for employees as long as the employer pays 100% of the contributions. These plans can be tailor made to fit each employer’s specific needs. The plan design can mirror a traditional benefits plan or it can be designed to be more flexible.
The Canada Revenue Agency (CRA) has specified that in order for businesses to qualify for these tax deductions, PHSPs must be administered by a third-party, arms-length provider. Pacific First, through Pacific Rim Administration Services Ltd., provides this service exclusively to Canadian businesses.
Assisting Clients in Developing their Private Health Services Plan
Pacific First has structured their PHSP as a pre-paid health and dental plan with invoices being sent to their client similar to those of a group insurance carrier. The contributions requested per employee are to cover claim, fees and any premiums.
- Non-taxable to the recipient
- Tax-deductible for the business or sole proprietor providing the plan
- Invoiced monthly
- No pre-qualifying health exams needed
- Claims are processed and returned usually within one week
- Adjudication fees on paid claims only
- Vast selection of qualified health and dental expenses included for coverage
- Premiums for other health and dental policies, and medical and hospital insurance plans, may be eligible for coverage.
- The savings generated from a PHSP can either be used to provide added benefits or a reduction in your monthly contribution.
By providing the above benefits through a Health and Welfare Trust Fund, rather than through conventional insurance contributions, a company wll improve its cash flow position and reduce costs without jeopardizing the rights and security of its employees.
The six principles governing the administration of PHSPs:
- There must be a contract or undertaking by one person to indemnify another.
- There must be an agreed to consideration for benefits for whole or part of medical or dental expenses. A consideration means either premium, deposits into the plan (pre-payments) or other remunerations.
- Only remuneration for hospital, dental or healthcare can be paid out of a PHSP.
- Claims must be adjudicated as per the Canada Revenue Agency to ensure they meet the current terms of the ITA..
- Cost plus claims may be processed to meet the indemnity requirements of the ITA. These must be applied to the contractual agreement and the equivalency guidelines adhered to.
- All plan providers must adhere to the “Privacy Act of Canada”. This means the following points are mandatory:
- The plan must be offered to all qualified employees
- The Privacy Act of Canada or Provincial Legislation must be adhered to
- Specified limits should be provided
- Shareholder benefits do not qualify
- All employees in a class must have the same limits
- Limits can be set on groups of benefits: Ex. Dental can be set at a specified amount per year; supplemental health can be combined with dental, or set at a further amount per year
- Limits can be set for each individually covered item (within the supplemental health limit). Ex. Chiropractic services could be set to a fixed amount per year, while massage therapy could be set to a differing amount
- Limits can be applied to families as a whole or applied to each individual family member
Eligible for Coverage Under a PHSP
- Ambulance services
- Dental services
- Equipment required to accommodate a health condition as specified under the Income Tax Act
- Home care
- Hospital services
- Laboratory work
- Medical Access Insurance
- MyCare Insurance providing access to Mayo Clinic
- Prescribed devices, including prosthesis and monitors
- Prescribed medical treatments and therapies preformed by a registered practitioner
- Prescribed medications with a DIN and dispensed by a pharmacist
- Psychology and psychotherapy
- Travel expenses, when treatment necessitates such