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PHSP Setup Requirements

Details you should understand

1. Offering the PHSP to yourself and your employees
2. Benefit Levels (full definition).
3. Funding your PHSP

Offering the PHSP to employees

A PHSP must be offered to all employees of a corporation. Failure to do so may result in a PHSP becoming a taxable shareholder benefit. All employees do not have to participate in the PHSP, but the plan must be offered to each employee. Any employees that do not wish to participate may elect to opt-out of the PHSP. Some employees may have coverage through a spouse or may simply prefer to not be part of the PHSP.

Benefit Levels

Each classification of employee must receive a determined dollar value at the beginning of each plan year for their health and dental expenses. This dollar amount is decided by the employer and becomes part of the administered plan. Following are several guidelines concerning benefit levels.

• The benefit levels must be reasonable. An acceptable rule of thumb for the maximum allowable yearly benefit would be 1/5 of yearly income.
• Equivalent amount for all employees – each employee classification should receive an equivalent benefit level. This does not mean an identical amount. For example, an acceptable amount could be 5% of income for all employees.
• Changing benefit levels can only be done by submitting a formal request to Olympia Trust company.

Funding the PHSP

Option 1 - Payment Included With Claims

This is essentially 'pay as you go'. Payment is included with every claim that is made. This option is ideal for a corporation with no arm's-length employees. Privacy laws prevent an employer from gaining access to an employee's health and dental expenses, but a corporation with no arm's-length employees would not encounter this issue. 'Pay as you go' simple and efficient for a family oriented business.

Option 2 -Base Trust Amount

When a company has arm's length employees it is recommended that a “Trust Fund” be set up. More details can be found in Large Business: Funding the PHSP.