As employers struggle to keep employees content, maintain strong productivity which directly impacts their profitability the issue of benefits is always a source of concern. It is shocking how many employers have scaled back, or eliminated benefits all together. Many individuals, despite exceptional skill sets seem to jump from contract to contract, trying to save a little and provide benefits for themselves and their families.
The insurance industry has mounted an impressive campaign to offer some degree of coverage for those who require additional benefits or in many cases just something. Employers and independent contractors alike might look to some degree of self insurance as a means of dealing with this benefit conundrum. The use of a Private Health Service Plan (PHSP) for the single employee, and Health and Welfare Trust (HWT) for the small company should be foremost in consideration.
These programs will allow full reimbursement of out of pocket medical expenses which are deductible to the individual in the case of the PHSP and to the corporation in the case of the HWT. These structures may also fund certain forms of insurance which should be acquired in expectation of the unlikely but possible catastrophic medical event. The fact that the plans are largely self administered helps keep administrative costs way down.
The Income Tax Act provides little relief for those who must bear their own medical costs. A 20% tax credit may be utilized on costs in excess of 3% of total income, or $2000. This means for most that the first $2000 of your medical and dental expenses is your own concern; you will get no relief fromOttawa.
The use of a HWT will allow you to tailor benefits for you, your family and your employees. You could utilize the structure to provide a non taxable benefit to an employee. For instance they would rather have help funding their child’s braces than have a pay increase which would be taxable. The plans also allow for co pay provisions.
Avoid complexity and aggressive use. These trusts are for benefits, not for vast labyrinthine offshore investment schemes. The Federal Court of Appeal has recently taken some to the woodshed over this.
The HWT and PHSP should be part of the business owner’s tool box. They will allow for sustainable benefits and happy employees. This can only be a plus when productivity and profitability are the end goals.