The Cost Plus program allows incorporated businesses to pay extended health and dental costs with corporate dollars on a pay as-you-go basis.
Cost Plus is a benefit normally extended to incorporated business owners and key employees and is available for expenses not covered under the basic extended health or dental plan.
Cost Plus is NOT a reimbursement program like the traditional core health and dental benefits and is treated as a fully deductible company paid expense.
Example: A business owner in a high income tax bracket would have to draw $6,000 in wages from his business to pay a $3,000 orthodontics bill. ($3,000 of the $6,000 has to be paid to Revenue Canada as tax on earnings). With Cost Plus the business simply writes a company cheque for $3,000, plus a small administration fee (usually 10 – 15%) to the insurance company. The insurance company treats this payment as a premium for benefits, thus making it entirely deductible to the business. The insurance company in turn makes a cheque payable to the dentist for $3,000 to cover the orthodontics expense. The savings to the company and business owner is at least $2,550!
Key points about Cost Plus:
The Cost Plus benefit is NOT a taxable employee benefit.
Cost Plus covers 100% of eligible expenses.
Cost Plus requires no regular premium commitment and simply has a small administration fee at time of use.
Expenses paid under the Cost Plus program are treated as “premiums” for extended health and dental benefits and can be deducted at 100% by the business.
Cost Plus is NOT a reimbursement program. The company has to actually PAY for the incurred expenses, however, corporate dollars are used and the expense is 100% tax deductible to the company.
Rather than paying monthly premiums for infrequently occurring expenses, Cost Plus allows businesses to self-insure and cover expenses on a “one-off” basis if and when they occur.
Cost Plus has a much broader scope of “eligible expenses” than the traditional core extended health and dental plans and becomes an integral component to a complete extended benefits program.
Although “Cost Plus” is not available to proprietors, an owner of unicorporated businesses, it can be used for arms length “employees” of un-incorporated businesses. “Cost Plus” includes dependents as they are defined and/or qualify under the Income Tax Act.
More questions? No problem… Contact us here