Introduction

Imagine a benefit plan where you are reimbursed for all your extended health and dental costs. Imagine not having restrictions imposed by an insurer. And as a business owner, imagine transforming all of your family’s extended health and dental costs into a business deduction making these expenses 100% tax-free.

The Promedent Plan^TM is the simplest, most cost effective way to draw tax-free money out of your business to pay 100% of your family’s extended health and dental costs. The Promedent Plan^TM allows you to utilize the same tax rules applied by insurance companies on plans for companies and governments with their employee benefit plans. The Promedent Plan^TM may replace your current plan or simply top-up an insured plan by reimbursing expenses not included by your insurer. The Promedent Plan^TM saves you a substantial amount of money.

In the 1998 Federal Budget, the Minister of Finance moved to improve equity in the treatment of self-employed Canadians by allowing owner-operators of businesses to deduct health and dental premiums against their business income. Incorporated entities were always allowed to deduct these premiums. Such premiums consist of payments or fees paid by an employer to an insurance company or to a "cost-plus" Private Health Services Plan ("PHSP") Administrator. Resulting reimbursements to an employee are tax-free. In essence, The Promedent Plan^TM uses the same tax rules in establishing a plan as insurance companies use for their plans.

An Extended Health & Dental benefit is commonly set up through an insurance company, but you must pay substantial premiums (greater than $1,200 annually per employee) regardless of whether or not you or your employees make any claims. In addition, insurance companies will limit claims through exclusions, deductibles, annual and lifetime limits, and reimbursement of fixed percentages (usually 50% or 80%) of expenses. These restrictions result in a considerable amount of health care and dental expenses not being reimbursed and, therefore, paid for with personal after-tax dollars.

By contrast, an Extended Health & Dental benefit may be set up through The Promedent Plan^TM, with the employer only paying actual extended health and dental costs plus an administration fee (currently $50 plus GST/HST as applicable by province). The Promedent Plan^TM has no monthly premiums and permits all allowable expenses that otherwise qualify as medical expenses pursuant to subsection 118.2(2) of the Income Tax Act to be eligible. Therefore, The Promedent Plan^TM includes many expenses not covered by insurance company plans (e.g. deduct 100% of your massage, physiotherapy, alternative medicine, dental, knee-brace, out-of-country medical, etc). The employer simply sets maximum dollar limits for employee classes. Refer to maximum annual benefit limit in the FAQ section.

Using The Promedent Plan^TM to claim a business deduction is more tax effective than claiming the personal medical tax credit. The medical tax credit is limited to the lowest individual marginal tax rate in your province, and it only applies if your health and dental costs are greater than the medical threshold[1]. In addition, the CCRA requires all medical receipts to be submitted for the medical tax credit claim; however, it does not require the employer to submit receipts for expenses claimed under The Promedent Plan^TM.

Tax effectiveness and cost controls are crucial to combating the rising cost of health benefits and employee turnover. Can your business afford not to have The Promedent Plan^TM?

For more information on The Promedent Plan^TM and how to sign up, download the Promedent Plan Booklet (pdf).

For tax opinion letter about The Promedent Plan^TM by KPMG, click here.

[1] The medical threshold is the lower of: (a) 3% of your net income or (b) approximately $1,678 (Amount (b) varies from province to province and is indexed annually).

Information provided by Promedent is not intended to provide professional tax
or business advice. Please consult with your professional advisor to
determine if The Promedent Plan™ is suitable for your needs.