This section describes the technical background and legal context of the program. It will be primarily of interest to your accountant or Financial planner
Private Health Services Plans
These include all forms of extended Health and Dental Care benefit plans not provided through Federal or Provincial Government programs, and include all Association Programs and Employer-Employee Benefit programs
They are defined under Section 248, sub-section (1), Paragraphs (a) and (b) of the Income Tax Act, and further defined in the Revenue Canada Taxation Interpretation Bulletin IT-339R2 entitled Meaning of "Private Health Services Plans"
Interpretation Bulletin IT-339R2 defines the meaning of Private Health Service Plans stating that:
Premiums are tax deductible by an employer if they are paid as "contributions made by an employer to or under a private health services plan on behalf of an employee.... and... are excluded from an employees income from an office or employment"
Cost Plus Plans
These are a special form of Private Health Services Plan and
are also defined in the Interpretation Bulletin IT-339R2 under Discussion
and Interpretation, Paragraph 6.
The Bulletin states "In a cost plus plan, an employer contracts with a trusteed plan..... The employer promises to reimburse the cost of such claims plus an administration fee to the trustee........the trustee agrees to idemnify the employee for claims on the defined risks........ such a plan qualifies as a private health services plan"
These come under the definition of a Medical Expense under Section 118.2 (2) of the Income Tax Act, and Revenue Canada Interpretation Bulletins IT339R2 and IT519R. Broadly speaking, they include all reasonable and customary expenses for medical, dental, vision and general healthcare, provided by licensed facilities and administered, prescribed or supervised by licensed practioners. Specific exclusions are:
|Experimental treatment, or treatment prohibited by law|
|Expenses eligible for reimbursement by Government Health Insurance or other Government assistance programs|
Employees and Dependents participating in their Provincial Health Insurance Plans
Employees of the Employer
The 1998 budget extended the deductibility for premiums paid to a Private Health Services Plan (including Cost Plus Plans), to include unincorporated self - employed individuals. There are certain conditions that apply in this case, however.
Any full time arms-length Employee (after 3 consecutive months of service) must be eligible for benefits at least equivalent to the benefits for which the owner is eligible.
|The total of full time arms length employees (after 3 consecutive months of service) must constitute at least 50% of the employees eligible for benefits under the plan|
|If full time arms length employees do not constitute at least 50% of those eligible under the plan, then there will be limits on the deductible amount for the owner ($1,500 for each of the Owner and Spouse, and $750 for each of the dependent children of the Owner)|