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An In-Depth Guide to Personal Health Spending Plans (PHSPs)

By Julie King |

One of the concerns when starting a business is loss of the safety net that comes with a full time job; things like employment insurance (EI), retirement plans and group benefits.

How can smaller companies cover healthcare costs without getting overwhelmed with inflexible and expensive insurance plans? Did you know that plans often charge you much more than the amount you are insured for and then increase your rates if you use the insured amount in a given fiscal year?

Fortunately, there is a very effective way for smaller companies to avoid these problems: The solution is to utilize a personal health savings plan or health savings account. These plans can save you a substantial amount of money, by letting you expense healthcare costs through your business using a third party service. Here is a brief overview:

What is a PHSP?

Personal Health Spending Plans are plans that allow a business to pay for 100 per cent of qualifying health care expenses of its employees, including company owners.

To qualify as a PHSP the plan must be set-up with a third party provider following the guidelines of Canada Revenue Agency's (CRA) Income Tax Act. In addition to the cost of the healthcare expenses the business will pay administrative fees as well.

Perry Diebert, president of Custom Care, noted that PHSPs are available everywhere in Canada except Quebec; Quebec tax laws prohibit such plans.

What are the benefits of a PHSP?

The key advantage is that the company covers the healthcare costs, which can result in a significant tax savings compared to using after-tax dollars. PHSPs can also help smaller companies attract talented employees by providing a robust benefits plan without the complexity of signing up for a formalized group plan.

Another key benefit of PHSPs is that they will often allow you to claim a broader range of services than you would normally have access to with a traditional health benefits plan.

Health Savings Plans In-Depth: A MemberZone Guide

Healthcare savings accounts are a very effective money-saving tool, yet they are complex. It took us over a week to unravel the complexities to present a concise summary of what businesses need to know to select and set a plan. To access this guide, please become a member!



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