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Accountant's Information
Quick Reference: IT-519R2 | IT-529 | IT-339R2 | IT-85R2
How does the MediDirect® plan work?
Step 1: Employee
- Personally pays for their medical, dental and wellness expenses
- Completes a MediDirect® Claim Form
- Attaches the original receipts
- Forwards claim directly to MediDirect®
Step 2: MediDirect® and Employer
- Upon receipt of the claim, MediDirect® invoices the Employer
OR
- The Employer has a Prefunded Account which is debited as claims arise
- The total claim amount includes the claim expenses to be reimbursed, plus a 10% administration fee plus applicable taxes
Step 3: MediDirect®
- Issues the reimbursement to the Employee within 5 business days upon receipt of the claim and payment by their Employer. This is a non-taxable benefit for the full amount of their expense claim.
- Sends the Employer a receipt which is used as a tax deduction
Frequently Asked Questions
Sole Proprietor
What are the taxation rules governing the MediDirect® plan?
- The MediDirect® plan qualifies as a "cost-plus" Private Health Services Plan ("PHSP"). The funds paid to a PHSP by an employer are business expenses deductible against business income. The amounts are non-taxable benefits to the employees. The employer must have an obligation under the employment contract to reimburse the eligible medical expenses of its employees. This obligation can be implied by signing up with MediDirect® Inc.
Are shareholders eligible?
- Yes, but if the plan is made available only to shareholders, CRA may argue that the plan is not a benefit received by virtue of employment, but rather an appropriation by a shareholder. If there is any doubt as to whether benefits are received as an employee or a shareholder, then steps can be taken to demonstrate that a person receives the benefit in his or her capacity as an employee. We can discuss these with your accountant.
- Small business owners should be careful in setting up a cost-plus plan that excludes non-shareholder employees. A cost-plus plan for a majority shareholder and principal employee of a corporation that excludes non-shareholder employees should be carefully planned to meet tax deductible eligibility status. We strongly urge anyone setting up a plan that excludes non-shareholder employees to discuss with a tax expert to obtain proper documentation.
What if all the employees are also shareholders and we have no other employees. Do we qualify?
- Yes, if the plan is made available to all employees who are also shareholders and it is demonstrated that they are receiving the benefits as an employee.
- Small business owners should be careful in setting up a cost-plus plan that excludes non-shareholder employees. A cost-plus plan for a majority shareholder and principal employee of a corporation that excludes non-shareholder employees should be carefully planned to meet tax deductible eligibility status. We strongly urge anyone setting up a plan that excludes non-shareholder employees to discuss with a tax expert to obtain proper documentation.
Is there a maximum annual benefit limit with the MediDirect® plan?
- Incorporated companies are permitted to set their own reasonable maximum annual limits, but sole proprietorships have an imposed maximum annual limit of $1,500 for an owner-manager employee, plus $1,500 for their spouse and $750 per child. If the sole proprietorship employs non-owner employees, then the limit for the owner is the greater of the aforementioned limitation or the limit provided to his employees.
Is there a dollar limit that the company may reimburse the employees through the MediDirect® plan?
Do I have to provide the same amount of benefit to all my employees?
As an employee of a business utilizing a MediDirect® plan, is there a way to be provided additional coverage?
What expenses qualify for reimbursement with the MediDirect® plan?
Are items such as health club memberships or expensive running shoes an "eligible expense"?
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A popular new option within a MediDirect® Health, Dental and Wellness Plan is a combined HSA and Wellness Account. One portion of the HSA is allotted to medical, dental or wellness expenses which are reimbursed as non-taxable benefits. The other portion is paid on a "wellness account", which is intended for expenses such as fitness club memberships, golf memberships or athletic footwear. These expenses are reimbursed to the employee but are a taxable benefit.
MediDirect® provides administration and adjudication of claims, determines whether the expenses are non-taxable or taxable, and provides full accounting to the corporation at year-end.
What are the benefits of using the MediDirect® plan?
- The employer provides tax-free employment benefit to their employees at a lower cost than other plans available. By providing health and dental benefits to their employees, they can improve employee morale and retention.
- The employee’s medical and dental expenses are reimbursed as a tax-free benefit and they pay no premiums.
How long does the employer hold employee benefit information?
How long does the employer hold employees’ submitted claims and receipts?
SOLE PROPRIETOR
I operate my business as a sole proprietorship. Can I deduct the claims I make for my family and myself through the MediDirect® plan?
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Yes, you can, provided that over 50% of your total income is derived from the sole proprietorship and you have at least one qualified or designated employee. The intention of the 1998 Federal Budget was that a sole proprietor that has at least one qualified or designated employee will be able to deduct amounts paid through a Private Health Services Plan. However, the Canada Revenue Agency (CRA) may question whether a deduction is available to a sole proprietor in respect of amounts paid under a Private Health Services Plan. It is advised that the sole proprietor can demonstrate that they have a qualified or designated employee working within the business. If you wish further information, please contact MediDirect®. We will discuss appropriate steps needed to properly document your client’s health services plan to comply with CRA regulations.
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