While the Canadian healthcare system provides relatively comprehensive care, employers often seek additional healthcare options to offer as supplemental employee benefits. Offering additional coverage may help you attract and retain good employees.
Depending on the circumstances, the premiums may be tax deductible to your business. Here are several options to consider:
Group Health Plans
Group health insurance is available for Canadian companies with as few as three employees. Employers tend to like group health plans because the premiums are usually reasonable. The downside is that premiums are not predictable from year to year, and once you offer a group health plan, it’s not easy to retract it as a benefit.
Employees like group health plans because the additional benefits can cover such essential expenses as:
- Prescription drugs
- Dental care
- Life and accidental death and dismemberment insurance
- Critical illness insurance and services
- Travel medical coverage
- Medical reimbursement plans
- Employee and family assistance programs
- International benefits
- Online wellness and health information
Employers can generally build group plans to cover the benefits their employees desire most. Employees typically submit claims and are reimbursed for their expenses.
Health Spending Accounts (HSAs)
HSAs have been available in Canada for many years and offer substantial tax advantages. Employers typically put a certain amount of money into each employee’s HSA, which the employee can then spend on expenses not covered under the Canadian healthcare system — for example, dental exams, orthodontia, prescriptions, chiropractor visits, eyeglasses and more. HSAs generally cover more services than group plans, including co-insurance payments, deductibles and amounts in excess of health and dental plan limits.
The biggest benefit of an HSA to the employer is cost certainty. Employers determine how much they’re going to contribute to employee accounts per year and that’s that – no more, no less. Plus, contributions are recognized as a business deduction in the year they are made.
If desired, employees can also easily contribute money to their HSAs via a pre-tax salary contribution. Depending on provincial regulations, unspent contributions can carry forward, providing an easy and tax-advantaged way to save for future healthcare needs.
Flexible Spending Accounts (FSAs)
Some employers increase flexibility for employees by creating a flexible spending account option. As they do with an HSA, employers contribute a certain amount of money to each employee’s FSA. However, the FSA offers several spending options, typically covering health, personal expenses (such as childcare, professional development or wellness expenses) and retirement. Employees can then divide their FSA dollars in whatever manner is best suited to their circumstances.
For example, if an employee’s spouse is already covered by a supplemental health plan that includes family members, the employee may choose to put all of his or her FSA dollars toward childcare or RRSP.
Healthcare expenses can add up, so employees are often pleased with dollars dedicated by the company to help cover these costs. Due to the tax consequences involved, it’s important to discuss healthcare coverage options for your employees with your DJB professional and benefits advisor as you design your plan.
We would be happy to discuss the tax consequences of your employee healthcare coverage programs with you. Contact us today.