Q: Are the annual premium and the 12% administration fee deductible to the employer?
A: Yes, the annual premium and the 12% administration fees are deductible to the employer. The actual claim amount is also deductible.
Q: What is the difference between what OMBAS covers and what traditional Insurance Companies cover?
A: Insurance companies and OMBAS follow the same rules when it comes to determining eligible medical health expenditures. OMBAS and Insurance Companies must adjudicate medical claims to ensure tax deductibility under the Income Tax Act. Where we differ, is choice. You choose your eligible coverage and restrictions with OMBAS. With Insurance Companies, plans are often pre-packaged.
Q: Can an owner of an incorporated company that doesn’t have any employees take out an OMBAS plan?
Q: Can a sole proprietor without arm’s length employees take out an OMBAS plan?
Q: Does the reimbursement of health care expenses produce a taxable benefit to the employee?
A: There is no taxable benefit realized by an employee in respect to the Private Health Services Plan. The key to preserving this status is to comply with the strict guidelines in our program. Learn more
Q: Is there any case law related to: (a) eligible items, (b) correct plan structure?
A: (a) Eligible items are listed by CRA.
(b) As long as the plan adheres to CRA regulations, as described by IT339R2, it qualifies. What may be more important is how the plan is administered. Are there appropriate accounting procedures? Are there qualified claims adjudication? Yes, as far as OMBAS is concerned.
In addition, the ultimate ruling guide of CRA, Advanced Tax Rulings, deal with specific company issues. Often, companies such as OMBAS have obtained rulings from CRA on specific issues.
At OMBAS we have obtained and reviewed all these rulings to ensure not only strict compliance, but to also provide optimal flexibility.
Q: Will my records be kept confidential?
A: At OMBAS we ensure that all employee information is kept confidential. Reporting is limited to advising the employer of remaining spending limits. Individual names of employees are not provided to the employer when advising of balances in health care spending.
Q: Do I need to keep copies of medical receipts?
A: You may keep a copy, but the original MUST be sent to OMBAS.
Q: If a receipt is lost, could a client use a credit card receipt for example?
A: Possibly, but they would need to talk to OMBAS.
Q: Who qualifies as an eligible dependant?
A: Employee dependants are defined as:
A dependant of an individual for a particular tax year is defined in subsection 118(6) to be a person who is:
• a child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece or nephew of the individual or the individual’s spouse or common-law partner;
• dependant on the individual for support at some time in the year;
• a resident of Canada at some time in the year. (This residence requirement does not apply if the person is the child or grandchild of the individual or of the individual’s spouse or common-law partner).
The definition of dependant is further clarified in Canada Revenue Agency’s Income Tax Folio S1-F1-C1 as follows:
“Whether a person is dependant upon the individual for support, for purposes of the definition is a question of fact. In general terms, support involves the provision of the basic necessities of life such as food, shelter and clothing, on a regular and consistent basis. This support may be given voluntarily or pursuant to a legal commitment.”
Q: If an individual had dental work done, of which 40% was covered by her husband’s coverage as a teacher, could OMBAS cover the other 60%? If so, how would this be claimed?
A: Yes. She would send in the summary statement from the insurance company in order to claim the other 60%.
Q: My existing insurance company tells me I can claim $250 every two benefit years for vision care. What is a benefit year? Is OMBAS the same?
A: With most insurance companies a benefit year starts on the date you incur the vision expense. For example, your company starts a benefit plan in February 2012 and on January 15, 2013 you buy glasses. Therefore January 15, 2013 is the start of your benefit year. You would be eligible to claim $250 again January 16, 2015.
With OMBAS, using the February 2012 plan start date you could spend $250 or more depending on your spending limit on vision care January 15, 2013. On February 1, 2013 you could spend another $250. In total you had coverage of $750 versus $250 from the insurance company over the same time frame. With OMBAS there is no benefit year. You are guided by your annual spending limit as determined by your employer.
Medical Service Providers
Q: What is the importance of a medical practitioner?
A: The income tax act and more specifically the Income tax Folio S1-F1-C1 specifically states that qualifying medical expenses must be provided by medical practitioners. The bulletin goes on to state that practitioners are governed under provincial legislation, hence, the Federation of Health Regulatory Colleges of Ontario.
Q: Who qualifies as a “health professional”?
A: One who practices in accordance with the professional standards set up by the health professionals organization and recognized by a governing jurisdiction.
Q: What is the definition of a medical practitioner?
A: A medical practitioner, in the province of Ontario, is a licensed health care professional governed by Provincial legislation and members of a particular College. Each College sets standards and guidelines for its members’ conduct and practice. Colleges make sure that regulated health professionals meet their training and educational standards before members can practice or use a professional title.
The Federation of Health Regulatory Colleges of Ontario was established by a law called the Regulated Health Professions Act to protect your right to safe, effective, ethical health care.
The Federation regulates more than 200,000 Ontario health professionals. Regulated health professionals are the only people providing you with health care who are held accountable by their college for their conduct and practice.
Q: What are the conditions that establish an employer/employee relationship?
A: There may be an employer-employee relationship when one or more of the following factors are present:
1. The employer makes payments to the employee: (1) on the basis of time; (2) at regular intervals; and (3) directly to individuals, or subject to source deductions (e.g. Canada Pension Plan or Employment Insurance).
2. The employer exercises supervisory control over the employee, has the authority to discipline the employee, and makes provisions for holiday or sickness pay.
3. The employer is responsible for furnishing the tools, facilities and materials needed to perform the duties.
4. The employee has no opportunity to profit, and is not exposed to any risk of loss, in work performance.The client should confirm with their accountant first to obtain an opinion.
Q: Can we accept permanent part time employees? For example, the ones in question work mostly a 40 hour week but not always. Some weeks are shorter and some weeks are longer, all depending on orders received. Is there a rule of thumb in a case such as this? What is it?
A: Part time employees can be offered benefits on a pro-rated basis. Our approach is if the employer is taking source deductions, the part-time employee will qualify. To date we have not found any definitive guidance from the Canada Revenue Agency on this issue.
Q: Suppose an employer offered the plan to all employees and one did not want to participate. Would this have any bearing on any of the employees who do participate?
Q: What if an eligible employee does not want to join the plan?
A: Use the Employee Enrolment Form and fill out section 3 called Refusal Of All Benefits and have it
signed by both the employee and the employer.
Q: What is the difference between Eligible Employees and Non Participating Employees?
A: An eligible employee is one who qualifies as a full time or part-time employee. This employee may choose to opt out. Therefore is not participating. Also, an employee or group of employees may be eligible but the employer decides this person or group will not be in the plan.
Annual Expenditure Limits
Q: What is the maximum annual benefit that an employee of an Incorporated business may select?
A: We would recommend a maximum 1/2 of income (50%). There are no hard and fast rules — try always to have a reasonable dollar amount. This may be more than 50% for owner/employees.
Q: Where does the $10,000 benefit for executives come from?
A: It is only a suggestion. More appropriately, one should ask what the expected medical expenses are, add 25%, and establish a benefit level. Prior to establishing a level in excess of $10,000 head office should be contacted.
Q: Is interest paid on any moneys held by OMBAS?
Q: I heard that companies could roll over unused credits for an additional 12 months.
A: In order for OMBAS to qualify as a PHSP, there must be an insurance component or element of risk to the employee. CRA does permit either the carry forward of unused account balances for one year or the carry-forward of unclaimed expenses for one year. The OMBAS PHSP can allow the carry-forward of unused spending account balances for one year but unless a company specifically requests this, it’s a “use it or lose it” policy with respect to spending limits.
If a carry-forward is permitted, OMBAS will track the current and prior balances separately. Claims incurred in the second year are paid from the prior year’s balance first, to reduce the risk that the second year balance is lost.
Q: Once a client has set the upper limits for employees, can those limits be increased, decreased or changed at any time? What are the rules?
A: Limits cannot be changed until the next contract year.
Q: If an employer signs up today and decides to quit before the end of the contract, do they get a refund prorated or at all? How would such an event be handled?
A: The client did sign a contract. There would have to be a logical reason not to abide by the contract. There would be no refund.
Q: Can a private corporation “self insure” and provide the tax benefit advantages to the company and the employees themselves?
A: Yes, a company can administer their own Private Health Services Plan. The challenge is that the company may set up the plan themselves and not follow CRA guidelines or they may find they have to pay an accountant and lawyer to draft the appropriate contracts, or even administer it for them. There is also a concern related to “Freedom of Information Protection” Act. An employer has no right to review an employee’s medical claims. If an employer is adjudicating claims, then an employee may have a legitimate concern against the employer.
Q: I have heard several people say, “Well then how does OMBAS make its money?” or “How can it stay in business?” or “It sounds too good to be true”. They are not being nosy, they just do not want to sign up to something that they perceive may vanish or not survive, even though not much money is involved. Please advise.
A: OMBAS is an administrator. To administer a Private Health Services Plan for an employer we charge an 12% fee for all claims paid. OMBAS is a value added service we provide in addition to our traditional tax and bookkeeping services.