Using a Health & Welfare Trust
Many self-employed individuals are often left out in the cold when dealing with their own medical costs.
- Those whose companies qualify to join a private group insurance plan are often faced with high premiums and a restrictive coverage base.
- Those who have their costs paid directly by the company will face taxable benefit issues.
- Those who pay their costs personally will have their expense claim reduced on their personal tax returns due the the "3% of net income limitation."
In recent years, Canada Customs and Revenue has implemented legislation that allows business owners to fully tax deduct 100% of their healthcare costs as a business expense using a Health and Welfare Trust.
Whether you are or are not a member of a group health plan, a Health & Welfare Trust is a vehicle that you should investigate further as it may allow for increased cost-efficiency.
How does it work? Although there are several different organizations providing the same service, they all share certain basic characteristics. There are no periodic premium payments required; payments are required only for intial set-up (usually no more than $500) and at the time that a claim is submitted. All medical costs are initially paid by the employee, who then submits the paid invoices to the company. Once a certain amount of costs are accumulated for an employee group, the company writes a cheque to the trust for the total plus a nominal administration fee (usually about 10% of the total costs). The trust then reimburses the employees directly for the expenses.
While a Health & Welfare Trust is not a perfect solution for everyone, it does provide a means to maximize your tax write-off while providing a cost-effective benefits package to employees who would not otherwise have access to medical benefits.
For more information on the mechanics of the program, contact us.
The information presented in this document is of a general nature only and should not be relied upon to replace professional advice. Before acting on this information, talk with a professional advisor as laws and regulations are constantly changing. Readers accept full responsibility; no document found here is a substitute for a consultation.