Long time no post, here is some marketing jargon I put together recently

A more affordable Health and Dental plan 

where you control the rates!

You may have heard of the recent bankruptcy of Nortel which left thousands of employees without benefits or pensions. This is because Nortel used a “Defined Benefit” plan. A Defined Benefit plan means essentially “you get this benefit, no matter the cost”. That’s how bankruptcy happens.

While the world of Pensions have long since made the switch away from Defined Benefit, and towards Defined Contribution plans. The land of Health and Dental insurance has stayed firmly in the world of Defined Benefit. A Defined Contribution plan is just that, a plan where you can control exactly how much you as an employer contribute.

Do you provide the same benefits as 10 years ago? But the price has doubled or even tripled? Double digit increases each year are becoming unsustainable for many businesses’. We have a way to put the control firmly back into your hands.

Health Care Spending Accounts  (HCSA) are the “Defined Contribution” plan of the Health Insurance world. Each employee receives a defined amount of benefit dollars each year, say $1000 or 3% of salary. The employee can spend these funds on healthcare, dental care, glasses, massage etc. There is no plan design, so the benefits are entirely flexible for the employee, no more “one size fits all” insurance plans.

While employees love the flexibility HCSA’s provide, employers love the ability to budget and control costs. Since the amount of benefit is not tied to an insurance policy, there is no insurance company to raise the rates year after year. If you have 10 employees and they each get $1,000 per year, you know your budget is $10,000 year after year. No surprises at renewal time. You can increase benefits to fight off the effects of inflation or decrease the benefits to keep in sync with the profitability of your business. You are in the driver’s seat.

Health Care Spending Accounts are low cost, and low administration. Administration fees are typically 10-15% of paid claims; rather than the 30-40% overhead build into the rates of most group insurance plans. Affordable stop loss policies are also and attractive option to reduce risk in event of a catastrophic claim.

If you would like more information on how a Health Care Spending Account might be right for your business, please contact me

Robert Reynolds, Certified Group Benefits Advisor

Hendry Swinton McKenzie Insurance Services Ltd.

Toll Free: 1-888-592-4614 or rob@hmrinsurance.ca

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Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614
rob@hmrinsurance.ca
www.hmrinsurance.ca

E.O. E.

Youtube

I am on the Youtubes

Believe it or not this was the best take out of about 10...

Olympia Trust http://www.olympiatrust.com/
Great for sole proprietors as it allows you to send in funding with claims, you dont have to prefund the trust.

Benecaid https://www.benecaid.com/
Great for employee groups as there is no setup fee, the trust can be funded monthly, quarterly or annually.

Blog Post on Health and Welfare Trusts http://canadianlifeandhealthinsurance.blogspot.com/2009/10/private-health-services-plans-aka.html

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Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614
rob@hmrinsurance.ca
www.hmrinsurance.ca

E.O. E.

Group Benefits GST/HST Update

Courtesy of Sun Life Focus Update

#237
PDF version

The regulations released on April 30, 2010 were enacted into law on June 9, 2010. The impact of the HST on your transactions with Sun Life depends on the nature of the arrangements that you have with us. We can now provide some information to help you better understand how the changes may affect you.

Background

The Department of Finance (Canada) released information on February 25, 2010, called “Place of Supply, Self-Assessment and Rebate Rules for Harmonized Sales Tax” followed by the regulations on April 30, 2010 providing the Place of Supply legislative framework.
Now that the regulations are enacted, we can finalize our administration processes based on the general Place of Supply rules regulations.
Sun Life previously communicated with you about the GST/HST and the Place of Supply rules. Here is a link to the most current communication for your review.

General Place of Supply rules 

The overall purpose of the Place of Supply Rules is to determine in which province the supply has been deemed to occur and, therefore, which sales tax rate will apply. The new general Place of Supply rules will rely on the location of the service recipient (i.e. the plan sponsor). Previously, the emphasis was on the location of the supplier (i.e. Sun Life) when determining the applicable sales tax rate.

How will the GST/HST be applied?

For Group Benefit services where GST/HST will apply on our fees, the regulations released by the Department of Finance, as well as the June 2010 edition of the GST/HST Technical Information bulletin released by CRA (B-103 – Harmonized Sales Tax; Place of supply rules for determining whether a supply is made in a province) were used to determine that the GST/HST be applied based on the contract address of the Plan sponsor – not where the service is performed.
For details about the services where GST/HST applies, please refer to the Frequently Asked Questions (FAQ) document attached.
Examples of how the rates will apply:  

• If a plan sponsor’s contract address is New Brunswick, the 13% HST rate will be used for all invoices/statements mailed.
• If the plan sponsor’s contract address is Quebec, then the 5% GST and 7.5% QST rates will be used for all invoices/statements mailed.
• If the plan sponsor’s contract address is Alberta, then the 5% GST rate will be used for all invoices/statements mailed

Overview of GST, HST or QST rates by Province:

Province	GST/HST/QST Rate
British Columbia	12%
Ontario	13%
Quebec	7.5%
New Brunswick	13%
Nova Scotia	13% (effective July 1, 2010, rate increases to 15%)
Newfoundland and Labrador	13%
Other provinces/Territories	5% GST

Note: When a Health & Welfare Trust is also the Plan Sponsor, the GST/HST rate will be determined based on the address of that Health & Welfare Trust for all invoices/statements mailed. In situations where the invoices/statements are mailed to a foreign address, we will look at the primary Canadian contract address listed to determine the GST/HST rate.

Other Relevant Details

Ontario Retail Sales Tax (ORST) – 8%
For invoices/statements where HST will be collected, the Ontario Retail Sales Tax of 8% will not apply on the fees. However the 8% ORST will continue to be collected on:

• ASO claims cost based on provincial distribution plus ASO fees where HST is not collected
• Group insurance premiums

Quebec Sales Tax on Goods and Services - 7.5%
As previously communicated, the new Place of Supply rules became effective on services performed on or after May 1, 2010, in New Brunswick, Nova Scotia and Newfoundland and Labrador.
It is Sun Life’s understanding , based on documents from the Quebec Budget, that the Place of Supply Rules for the QST at 7.5% (8.5% effective January 1, 2011 and 9.5% effective January 1, 2012) will also be effective May 1 , 2010. We continue to monitor this and will update you after the regulations are published.
The new rules will only become effective in Ontario and British Columbia on services performed on or after the July 1, 2010 HST implementation date.

Other Taxes

The only change slated for the other taxes applicable on Group Benefit products and services is in Quebec where the compensatory tax rate has increased from .35% to .55% effective March 31, 2010. This change increased the premium tax rate to 2.55%.

More Information

Here is a link to the Frequently Asked Questionsdocument which may be helpful. You should also contact your tax advisor to ensure you have the information you need to be ready for these tax rates changes.

Private Health Services Plans AKA Health and Welfare Trust AKA Health Spending Accounts

While each of the above names are in fact slightly different they are all fairly interchangeable and they all have the same goal at heart; making medical expenses tax deductible.

Government likes a healthy electorate, so they encourage business to provide health benefits by making benefits tax preferred. Health and Dental benefits are tax deductible to a business, AND non-taxable to the employee. Health insurance is basically tax free!

I use the words Health and Welfare Trust in the image below, it works the same way.

Back in the day, insurance companies would only offer insurance to businesses with at least 10+ employees. This was a problem to most small businesses because it meant they couldn’t offer medical benefits. So along comes Mr. Taxman and creates the Private Health Services Plan (PHSP). A private health services plan is essentially a trust fund set up by a company to pay employee medical expenses. Because the business pays into a trust, it is tax deductible, and because the trust pays the medical expenses for the employee, the benefit is non-taxable. It is NOT insurance, once you run out of money in your trust you are on your own. PHSPs save a heck of a lot of money in taxes.


Some of the rules that apply to all PHSPs is that all claims must be adjudicated by a third party, typically a trust company or an insurance company. There are two reasons for this requirement: First, so privacy is maintained for employees. Secondly, so that all claims are verified eligible. These plan administrators usually charge a small fee, typically 10%, to push the paper and process the claim.

PHSPs are very flexible, they will pay for expenses that no insurance company will touch. Rather than use a plan design, (we will cover 80% of this drug but only 50% of that drug) any prescription, medical device, dental expense or vision care is eligible. What is and is not covered is dictated by the Income Tax Act, the Act is very vague and if you can justify it as a medical expense it is probably eligible.

Sample List of Eligible Expenses (PDF)

With the PHSP now any size business can provide health benefits to their employee’s. Incorporated business are essentially unlimited to how much they want to provide in benefit, unincorporated businesses such as sole proprietors have a few rules to follow.

Unincorporated
If you are unincorporated Canada Revenue has a harder time tracking your actual business income. Because of this they impose some strict rules to prevent money laundering. If you are unincorporated, your benefit cannot exceed the following

$1500 per year for yourself
$1500 per year for your spouse (if any)
$750 per dependent child (if any)

The average family of four gets $4500 in tax free medical and dental each year. Of note is that the money can be spent by anyone in the family, if you are greedy and want to spend $4500 yourself and let little Timmy’s teeth rot, you can.

Incorporated 
If you have employee's you MUST provide a "like benefit" which just means give them a piece of the pie as well. The rule of thumb is that no class of employee should receive more than 10 times the next class. So if you are the owner and want $10,000 your employees should all receive $1,000. If you don't you risk creating a shareholder benefit, which is taxable.



My providers
I use two providers, Olympia Trust and Quikcard. I use two because they suit different needs.

Olympia Trust is excellent for sole proprietors or single person companies. They allow payment to be sent in at the time of claim, rather than requiring a trust fund be prepaid. Downside, they charge almost $400 to set up a plan. Their administration fee is 10% of the paid claims.

Quikcard, has no setup fee but requires prefunding of a trust, this means writing a cheque for $1500 to $4500 at the beginning of the year or making monthly contributions, and letting them sit on it. If you don’t spend the money you can have it back, it is yours after all, but not a lot of people like letting go of that much cash if they don’t have too. Their administration fee is 12% of paid claims.


TL;DR: If you are self employed incorporated or not, with any medical, dental or vision care claims you can save a boat load of tax dollars with a Private Health Services Plan

Edit: April 1, 2011 - I have changed providers away from Benecaid and to Quikcard, as Benecaid has implemented a $95 per year fee which started on April 1, 2011 and they provided very little notice of this change.