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Private Health Services Plan

Requirements for a Qualifying PHSP

CRA may disqualify a PHSP if their established guidelines are not included in a PHSP.  All tax-free benefits for health and dental claims would become taxable.

  1. The PHSP must be in the nature of insurance (definition).
  2. There must be an employer – employee (definition) relationship.
  3. The employer must arrange similar reimbursement levels for each classification of employee.
  4. Any person receiving benefits must be an employee.
  5. The employer will not provide cash payments or other considerations for unused reimbursement amounts.
  6. Employees will only claim eligible expenses as defined by Income Tax Act, or as stated by the employer.
  7. The employer will legally honor all obligations to reimburse employee.
  8. There will be an independent regulated trustee to administer the plan.
  9. The effective date of a PHSP must be in the current fiscal year of employer’s company.
  10. The PHSP must not be confused with Health & Welfare Trust.

Private Health Services Plans Must Provide for a Degree of Risk 

It is Revenue Canada’s belief that a health insurance plan must involve a reasonable degree of risk in order to meet the definition of “private health services plan” in subsection 248(1).  Plans that provide an indefinite carry forward of unclaimed medical expenses would not involve a reasonable degree of risk.  However, a plan would have a reasonable degree of risk if it provided that any unused balances be forfeited. 

Technical Interpretation, Business and General Division
June 2, 1992
Revenue Canada File Number 9210485