There are many reasons why a business owner may consider a flexible benefit solution like FlexSave. Whether you already have an existing benefit plan and are looking for additional flexibility, cost savings or have not yet put a plan in place; Flexsave may be just the health and dental solution you are looking for.
1. Currently paying health/dental expenses personally
Many businesses do not currently have a program in place for employee health and dental expenses. FlexSave™ can provide a mechanism to have these health care expenses paid from a far more tax-efficient place without the company having to qualify or put in place a traditional employee benefit plan.1
2. Have investigated insurance but frustrated with expensive premiums
Many small businesses have investigated health and dental coverage but did not pursue it for the following reasons:
Company was too small to have real “purchasing power” with the insurance companies
Company was too new or in an industry where insurers are not interested in providing benefits
The majority of their workforce had coverage through spousal plans
Their workforce wanted control over where they could use funds without being restricted by co-insurance or low maximums in each category (i.e. dental, vision care, chiropractic, etc.)
The FlexSave™ Program can address many of these issues as it does not restrict where the allotted dollars per employee are utilized and can even be used to run through the deductibles, co-insurance and amounts beyond the maximums in a spouse’s plan.2
3. Want to reduce or eliminate potential increases in health and dental insurance premiums
Since FlexSave™ is not a traditional plan of insurance, some employers are drawn to the concept of reducing their health and dental funding. Employers under a FlexSave™ Program know that they will not receive rate reviews and increases annually based on their employee usage.
These employers may use the FlexSave™ Program on its own or perhaps as a complementing component of their existing traditional plan that could be seeing heavy usage and rate pressure. The FlexSave™Program may also be used to complement existing traditional coverage by providing reimbursement amounts that were not covered under another plan, such as the deductibles, co-insurance amounts, and amounts beyond the maximums.1
4. Using the Medical Expense Tax Credit through personal income taxes
Any individual may deduct medical expenses through their income tax. The amount is determined by a CRA formula.2 This formula creates a threshold in which any amount exceeding that can be eligible for deduction. Currently the threshold formula is calculated by taking the lesser or 3% of an individual’s net income or a maximum determined by CRA each tax year. The allowable portion is then multiplied by the lowest tax rate percentage for the year. (ref: Tax Folio S1-F1-C1: Medical Expense Tax Credit) The CRA does not allow a dollar-for-dollar deduction, whereas anything that is contributed to FlexSave™ may be paid with pre-tax dollars.1 The end result is that FlexSave™ may offer a higher tax deduction for the business. The chart in the link below shows the differences in income and the tax comparison between FlexSave™ and the Medical Expense Tax Credit.2
5. Cost savings comparison
FlexSave vs Medical Expense Tax Credit
Example: Net income of $50,000 per year with family medical expenses of $1,600
Costs - $1,600
Costs - $1,600
Deduct - $1,500 (3% of net income)
**Administration fee (10%)** - $160
Total - $100
Total - $1,760
TAX CREDIT3 - $25
TAX DEDUCTION4 - $1,760
________________________________________ 1 Every tax situation is unique and can be quite complex. Clients should always seek independent tax advice before putting a FlexSave™ plan in place or deducting expenses related to FlexSave™.
2 For more information, please refer to Tax Folio S1-F1-C1: Medical Expense Tax Credit available at the CRA website www.cra-arc.gc.ca
3 Based on a Combined Federal and Provincial rate of 25%
4 Medical Expense Tax Credit: The federal tax credit consists of 16% if expenses in excess of the lesser of $2,109 (federally for 2012) or 3% of the individual’s net income for the year. *Applicable taxes apply and vary depending on the province in which you reside.