Private Health Service Plans (PHSP) for Canadian Businesses

250.590.5747

General FAQs

What is a private health services plan ("PHSP")?

Simply put, a PHSP is a private dental and health care plan. It is a form of tax relief that is exclusive to Canada and allows 100% of medical and dental costs incurred by you and your employees to be expensed by your business. In turn, the PHSP returns the amounts paid, to you and your employees, tax free. Canada Revenue Agency (CRA) legislated Private Health Services Plans as a way for Canadian businesses to incent their employees by providing a tax effective, comprehensive, and affordable dental and health care plan option. They are particularly suited to small and medium sized businesses. A Private Health Services Plan is sometimes referred to as a health and welfare trust or health spending account.

What are the ongoing costs with respect to a PHSP set up by Coast Mountain Benefits?

Other than the initial set up fee and the 10% adminstration fee, charged on the claim amount, there are no ongoing fees or charges to the business.

  • We have no annual maintenance fees
  • We have no renewal fees of any kind
  • There are no monthly or other premiums
  • Once the PHSP is set up with us, if nobody uses the plan there are no costs until somebody does

Do all employees have to be provided the same allowable expenditure limit?

No, not in the case of a corporation. Corporations can set up different classes of employees. Each class can have a different expenditure limit, but each employee within a class would receive the same limit. For example, executives could receive one limit, managers another, and fulltime staff yet another.

In the case of an unicorporated business with arms length employees, the business owners expediture limit is limited to that of the employee with the lowest expenditure limit.

I own a corporation? Do I need to provide all my employees a benefit under the PHSP?

With corporations, all fulltime employees must be offered the plan. If an employee wishes, they can opt out of the plan, if for example they are covered under their spouses plan. Part time employees might be excluded from the plan.

In the case of an unicorporated business all arms length employees must be on the plan.

What is considered an eligible expense under a PHSP?

The list of eligible expenses is extensive. Please click here for a complete listing. An exerpt of the listing is as follows:

  • Almost all dental care and orthodontic expenses
  • Vision care expenses - contact lenses, eye glasses, and laser eye surgery
  • Prescriptions
  • Depending on your Province or Territory - acupuncture, chiropractors, massage therapists, naturopaths, physiotherapists, traditional Chinese medical practitioners
  • See Eligible Expenses for a more comprehensive listing

Who can I claim as either a spouse or a dependant?

For corporations...

  • a spouse is defined as someone who is either
    1. legally married to the employee; or
    2. a member of the opposite or same sex with whom the employee has been living for at least 12 months, and who is publicly represented as the employee's spouse,
  • a dependant is defined as a person who at any time in the year is a member of the employee's household (they cannot be visiting you), wholly dependent on the employee for support and is
    1. the child or grandchild of the Employee or of the Employee 's spouse; or
    2. the parent, grandparent, brother, sister, uncle, aunt, niece or nephew, if resident in Canada at any time in the year, of the Employee or of the Employee 's spouse.
    3. a child 25 years of age and under, if attending a post-secondary institution on a full-time basis

For unincorporated businesses (Sole Proprietors, Partnerships and Contractors)...

  • a spouse is defined as someone who is either
    1. legally married to the business owner; or
    2. a common-law spouse of the business owner,
  • a dependant is defined as a person who at any time in the year is a member of the business owner's household (they cannot be visiting you), wholly dependent on the business owners for support and is
    1. the parent or grandparent by blood, marriage, common-law partnership, or adoption; of the business owner or of the business owner's spouse; or
    2. the child, grandchild, brother, or sister, by blood, marriage, common-law partnership, or adoption of the business owner or of the business owner's spouse and is either under 18 years of age, or mentally or physically impaired.

How do I submit a claim?

You can either download a claim form from our Forms Page or contact us and we will send you one.

Once you have the form, simply

  • fill in the details on the form requested from each reciept,
  • attach the original receipts (we will keep these on file for 7 years)
  • sign the form
  • mail the completed form and original receipts to us

Is there a cost with respect to submitting a claim?

There are two costs associated with submitting a claim

  1. there is a 10% adminstration fee charged to the business
  2. there is $4.00 processing fee ($3.73 + HST of $0.43) charged to all claimants and deducted from all reimbursements

I understand that our current group medical would cover 80% of prescriptions why would I need a PHSP?

A PHSP can be used to provide a tax deduction in your business for the other 20% not covered by the group plan resulting in a tax free payment to you. Further, the PHSP can be used for any excesses over existing coverage. For example, an orthotic costs $400 and both you and your spouse require them, but your coverage is only $300 annually. Your group plan will cover the first $300 and the remaining $500 not covered can be put through the PHSP.

Why do we hand a cheque to Coast Mountain Benefits only to receive one back?

For a business, the Income Tax Act allows the deduction of any expense incurred for the purpose of gaining or producing income. In the case of a PHSP the expense is incurred to incent employees (i.e. for the purposes of gaining or producing income) and this deduction is not denied anywhere in the act.

So the mechanics are (For a visual representation of the mechanics see our "How It Works" pdf):

  1. The medical practitioner, dentist, supplier, etc will not provide the service or item without being paid first so the employee must pay the expense personally first.
  2. The employee then files a claim with Coast Mountain Benefits for the expense amount plus the service fee.
  3. The claim is processed by Coast Mountain Benefits and the invoice is issued to the company for payment of the claim and the service fee.
  4. Then as allowed under the Income Tax Act the company with the PHSP can pay the claim and obtain a full deduction in the business.
  5. Lastly, Coast Mountain Benefits pays the claim amount net of the fee to the individual tax free. The tax free payment is allowed under section 6(1)(a)(i) which specifically excludes, from the employees income, payments received with respect to a PHSP (for a technical explanation click here).

I am a sole proprietor and not a corporation, how am I allowed to use a PHSP?

For sole proprietors section 20.01 if the Income Tax Act allows the deduction of payments with respect to a private health services plan and requires the payment be made to either an insurance company, a trustee or a person or partnership engaged in the business of offering to the public its services as an administrator of private health services plans (This is Coast Mountain Benefits)

Can you tell me why the payment from the PHSP is tax free to the employee, sole proprietor or other unincorporated business owner?

The tax free payment is allowed under section 6(1)(a)(i) which specifically excludes, from the employees income, payments received with respect to a PHSP.

(for a technical explanation click here)

Are private health service plans defined in the Income Tax Act?

PHSP's are defined in section 248(1) if the Income Tax Act:

"private health services plan" means
(a) a contract of insurance in respect of hospital expenses, medical expenses or any combination of such expenses, or
(b) a medical care insurance plan or hospital care insurance plan or any combination of such plans, except any such contract or plan established by or pursuant to
(c) a law of a province that establishes a health care insurance plan as defined in section 2 of the Canada Health Act, or
(d) an Act of Parliament or a regulation made thereunder that authorizes the provision of a medical care insurance plan or hospital care insurance plan for employees of Canada and their dependants and for dependants of members of the Royal Canadian Mounted Police and the regular force where such employees or members were appointed in Canada and are serving outside Canada;

I incurred a large dental expense last month and would like a PHSP to cover the expense; can I backdate the plan to get this expense covered?

Unfortunately, it is not possible to back date a plan in order claim expenses incurred prior to setting up a PHSP. Corporate plans can be made effective the 1st day of a current month. Unicorporated businesses are effective the day that the plans are formed.

As a sole proprietor, Canada Revenue Agency (CRA) has legislated limits for my family; $1,500 for me, $1,500 for my spouse and $750 for my child. Can I spend more than $750 on my child?

Yes, the limits set out by CRA are meant to be aggregated. So in your case, your family limit is $3,750 and any or all if this amount can be spent on any member of the family. Any amounts left over can be spent on the remaining family members in the same way.