How a Health & Welfare Trust Can Benefit Your BusinessSubmitted by MacDev Financial Group on December 31st, 2018
Most incorporated business owners pay for health and dental insurance coverage one of two ways—personally using after-tax dollars or through a group health insurance plan. Both ways don’t help you save money or provide huge tax savings. If anything, you pay out more than you should for healthcare insurance and related expenses.
If you are an incorporated business with two or more employees, by establishing a health & welfare trust, you can receive customized health coverage specific to your company and employee needs, pay less and write off 100 percent of healthcare costs as a business expense. There is no deduction and you’ll use before tax dollars. That automatically translates into substantial tax savings for your business than simply deducting your dental & medical related expenses through your personal income tax to receive a tax credit.
What is a Health & Welfare Trust?
A health and welfare trust is an alternative health benefits plan sanctioned by the Canadian Revenue Agency that provides a tax-free vehicle for financing a corporation’s healthcare and dental costs. It is a spending account set up by a business to cover their healthcare and dental expenses as well as those of their employees and dependents. Think of it as an innovative self-insurance model that provides business owners more control over health planning than typically provided through “one-size-fits-all” traditional group insurance plans.
How a Health & Welfare Trust Works
As the employer, you manage this spending account by depositing funds, setting employee contribution levels and deposit schedules. Funds placed in the trust by you are also 100 percent tax deductible in the year contributed. Benefits are also non-taxable for your employees and dependents. The account can also work in tandem with a traditional group benefits plan.
Benefits of a Health & Welfare Trust
One of the greatest benefits of establishing a health and welfare trust for your business is affordability and tax savings. Costs are predictable, saving you on average of 20 – 30% over traditional group plans. With a health and welfare trust, you only pay for healthcare benefits you use.
A health and welfare trust will also provide you with a broader range of coverage than traditional group insurance plans. Even if you or one of your employees has coverage through a spousal group benefits plan, a health and welfare trust can be used to supplement alternative health care expenses such as laser eye surgery, naturopathic medicine, and prescription drugs sometimes excluded by traditional group plans. You can even claim out-of-pocket deductibles and co-insurance on a group plan through your Health and Welfare Trust.
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