PHSP Examples
Example One | Example Two | Example Three
Example One
Mr. and Mrs. Jones own "Widget Co. Ltd." Mr. and Mrs. Jones split income and each report $35,000 in employment income. They have two children. Medical expenses for the year are $2500.
Mr. and Mrs. Jones pay for the medical services and save the original receipts, later giving them to their employer "Widget Co. Ltd."
"Widget Co. Ltd." sends receipts, along with a company cheque in the amount of $2500, plus a 10% administration fee (total $2750) to Olympia Trust.
Olympia Trust issues a tax-free reimbursement cheque to Mr. and Mrs. Jones for $2500. At "Widget Co. Ltd." year-end, Olympia Trust prepares a "Statement of Expenses" for "Widget". These expenses are tax-deductible.
Mr. and Mrs. Jones want to accumulate their receipts and make only two claims a year. In other words, payments are included with submission of claims, as the chart below shows.
Example Two
Mr. X is a professional and has an incorporated business. He is married with two dependant children. During the year, his family incurred medical expenses of $3000 for speech therapy, prescriptions and dental. His annual earnings are $80,000 and his marginal tax rate depends on the province in which he lives. Assume in this case Mr. X lives in BC.
Prior to the Olympia Trust PHSP, his medical expense of $3000 actually cost him $5400.
| His company paid him | $5400 |
| Minus his tax @ 45% | -$2400 |
| Medical expenses | $3000 |
After taking out the Olympia Trust Private Health Plan his $3000 medical expense only cost him $3300.
| His company paid Olympia Trust | $3300 |
| Minus the Administration Fee (10%) | -$300 |
| Medical expenses | $3000 |
A SAVINGS OF $2100
Mr. X wishes to pre-fund his Olympia Plan using a PAC. The flow of funds is illustrated below.
Example Three
This example shows the flexibility of a cost plus plan. The company has four employees, three of which are arm's length. The owner (also acting as an employee) intends to introduce a new employee health care plan that is effective and affordable in the hope that she can retain current employees. The employer is of the view that a cost plus PHSP will reduce the net cost of providing these benefits when compared to their existing traditional plan. The plan details are as follows:
The employer will provide each employee with a base amount of $1000 plus an allowance of $500 for each dependent of the employee to a maximum of $2000 per annum. Please note this is an example and the employer can actually decide greater or lesser amounts depending on the nature of the company. The value is the employee will be reimbursed tax-free for any eligible expense under the Income Tax Act.