Frequently Asked Questions
What is a Private Health Services Plan?
A Private Health Services Plan (PHSP) is a Canadian tax-free vehicle for financing the health care costs of employees. They were introduced in 1989 by Canada Revenue Agency (CRA) in their interpretation bulletin IT-339R2. Today, they are one of the most popular forms of health spending accounts in the Canadian market. Contact your accountant if you wish to ascertain the benefits to you and/or your business.
Is it better to claim my medical expenses on my personal income tax return?
99% of the time, the answer is “no”. Your accountant can explain the myriad of reasons as to why not.
Do I need to be in good health to participate?
No. Of course we hope that you are! Existing or past health conditions do not affect your ability to enroll in the navancorp PHSP.
Are there age limits to participate in a navancorp PHSP?
There are no age limits for employees, as long as the employee is still actively working for the company. Note that PHSP coverage extends to spouses and immediate family members.
Do I need to be incorporated to take advantage of a navancorp PHSP?
Yes, any Canadian incorporated company can take advantage of PHSPs with the exception of Quebec-based companies (the province of Quebec has separate legislation concerning the taxation of health benefits.)
Some providers do offer a limited version of a PHSP, however, our interpretation of the Income Tax Act is that sole proprietors (unincorporated companies) are required to enter into traditional group benefits programs if they are seeking medical/dental/health insurance.
At present, only incorporated businesses may enjoy the benefits of a navancorp PHSP. If you are a sole-proprietor, we recommend that you discuss options with your accountant.
How long does it take to have my claim processed and to receive reimbursement?
Typically claims are processed and payments issued within 5 business days of receipt at our Claims Centre. Our future plans include online claim and payment status for submitters.
What are the major advantages of a navancorp PHSP?
Some of the major advantages of a navancorp PHSP include:
Tax Efficiency – Health and Dental Expenses are 100% deductible for your business and tax-free for the employee, reducing taxes for both.
Broader Coverage – Get a comprehensive range of coverage that is often excluded by traditional benefits plans.
100% Reimbursement – 100% of eligible benefits claims are reimbursed up to the annual limits that you set.
Works with Other Plans – Deduct any eligible expenses not covered by a spouse’s plan or submit premiums from insured plans to your navancorp PHSP to make them deductible and reduce taxes. You can receive reimbursement for the annual deductible amounts under provincial drug benefit plans as well.
Greater Flexibility & Control – You are in full control, allocating benefit dollars to where they are needed the most. The employee chooses which medical service is needed, not the insurance company.
Simplicity – Traditional benefit plans have become increasingly complex and costly. A navancorp PHSP is an easy way to manage your Health and Dental costs. You pay only for what you use, and detailed reporting is provided to you (at no charge) at the end of each fiscal year.
What are the advantages of a navancorp PHSP versus paying my health expenses “out of pocket”?
With a navancorp PHSP, you are able to deduct many different health costs as a business expense. This saves you a significant amount of money, as “pre-tax” dollars are being used to fund the PHSP.
A typical Canadian family spends about $3000 on healthcare each year – in some instances much more. It only takes a few visits to a dentist, prescription drugs and a pair of glasses to suddenly add up. For an individual with a 30% marginal tax rate this would mean a savings of about $900 per year versus using “after-tax” dollars. Depending on your province of residence, it could be even more. Ask your tax professional or accountant about how much you can save annually using a navancorp PHSP.
What is the role of my accountant in establishing a navancorp PHSP?
Though very straightforward to use, a PHSP does require proper explanation and understanding before being adopted by a business. As PHSPs directly involve matters of taxation, it is recommended that you discuss your own particular needs with your tax professional or accountant.
How do I establish the start date for eligible expenses in my navancorp PHSP for my employees?
You (in your role as planholder) specify the Effective Date. This is done by establishing your first “benefit year”. Your benefit year can be any twelve (12) month period ending in the current fiscal year.
A navancorp PHSP can be retroactive because a PHSP is defined as being “in the form of insurance”, even though it is not traditional premium-based insurance where premiums paid by many cover the claims of a few. A PHSP is based on each business covering the medical expenses of its own plan with a “cost plus commission” to a third party provider (navancorp). Since the planholder must cover the expenses, it will be the planholder that determines which dates your employees will be covered.
As the business owner, the Effective Date is established based upon a) your generosity towards your employees and b) the ability of your business to cover the financial cost. “Double dipping” is not allowed, which means that any medical expenses already claimed on a personal tax return for a Medical Expense Tax Credit (METC) cannot be claimed again for a second benefit.
On the enrollment application form do I provide the postal address of the business or our personal postal address?
The enrollment application should show the business mailing address of the planholder. This is where navancorp will send all planholder correspondence. We do not send business information to the employees; it is always sent to the business address. On the Plan Member Enrollment Form you would put the mailing address for each employee. This is the address where the reimbursement cheques will be mailed for that employee (if they are not opting for direct deposit).
Our company has employees, shareholders and some who are both. How do we ensure that we are following the rules when setting up a navancorp PHSP?
A navancorp PHSP is designed as an “employee” benefit, not a “shareholder” benefit. All members of the PHSP must be employees, so workers who are “shareholders-only” should be established as employees as well. For planholders who are one-person companies and use dividends for the bulk of their compensation, they should pay themselves at least some salary and draft an employee contract to meet this definition. You should consult your accountant or tax advisor for further advice in this regard.
Do we need to list myself, my spouse and each of our family members on the Member Enrollment Form when enrolling for a navancorp PHSP?
No, only “Covered Employees” need to appear on the form -- though both spouses can be listed if they are both employees. Any expenses for you, your spouse, your children, and any other dependents can all be claimed under you as the Covered Employee. A navancorp PHSP covers any member of your household that is related by blood, marriage or adoption.
How do we control the costs of health benefits using a navancorp PHSP?
No full-time permanent employee can be excluded from participating in your navancorp PHSP, unless they voluntarily opt out (note that any “opt outs” should be documented and kept on file at the corporation). The planholder is able to control the costs of operating a benefit plan by assigning employees into different classes of coverage. Employees who have a key role in the company, such as the owner or principal, can have a higher limit; middle management or supervisory level employees can be grouped with slightly less coverage. Clerical or administrative positions can have a class with lower coverage. Temporary, seasonal or part-time employees can be excluded, or their cost can be managed with probation periods, minimum hour limits and/or lower coverage amounts.
How much should I set as my class limits?
We advise clients that a reasonable maximum benefit level per year is $15,000 per employee. The typical class limits are $15,000 for Executives, $7500 for Senior Managers and $5000 for employees. CRA does make provisions for “reasonableness”, so in order to adhere to this, our recommendation is that the highest limit within the PHSP does not exceed 10 times that of the lowest limit. By using our recommendation above ($15,000, $7500 and $5000), you can be assured that your PHSP meets the “reasonableness” test. Part of the rationale is that the PHSP benefit cannot be skewed unfairly towards the company Executives – which could result in the benefits being deemed a shareholder benefit.
Other considerations are your company’s ability to cover the costs, and your level of generosity towards your employees. The limits can be revisited through the year, raised and lowered by advising us of your intentions.
I currently subscribe to a traditional health benefits plan. Why should I switch?
Traditional benefit premiums are continuously on the rise. Check your statements year-over-year to witness this for yourself. Limits to coverage, partial reimbursement and maximum fee guides are constantly shifting in order for providers to consistently achieve healthy profit margins. This means that very few people actually claim sufficient amounts to cover the premiums they pay. By establishing a navancorp PHSP, you pay only for what you use – adding up to significant savings each year, with the bonus of potential tax savings. Of course, cost savings aren’t always the full story, but when you factor in the other advantages over traditional benefit plans, including more comprehensive coverage, 100% reimbursement, greater flexibility and total simplicity, the rationale is compelling. Smart benefits for smart people.
I periodically purchase medical supplies which have GST/HST and/or PST on the receipt. Should I include the GST/HST and PST on my claim?
Yes. The full cost of eligible health expenses including GST, HST and/or PST should be included on your claim. Note that paid parking at doctor’s offices, hospitals, medical supply companies, etc. is not an eligible health expense
My spouse/partner has health benefit coverage with his/her employer. Can I claim the expenses that are not covered by that plan with a navancorp PHSP?
Yes! This is in-fact very common and acceptable. Your navancorp PHSP is supplementary to your spouse’s/partner’s benefit plan. The process for submission is the same with one exception -once you receive the statement from his/her insurance company indicating the amount that was not covered by that plan, you simply forward that insurance company’s statement to navancorp as part of your claim submission. You would circle/highlight/underline the claimed amounts and you will be reimbursed for the disallowed amounts under your spouse’s/partner’s plan. Any expenses that were only partially covered by their plan (or were totally ineligible) can be considered for a claim under a navancorp PHSP.
If you know beforehand that a particular service is not covered or that the annual maximums have been reached (chiropractic or massage therapy as an example) by the other plan, you can speed up your reimbursement by submitting the original receipt from the health provider directly to navancorp. This is particularly valuable in cases where health services are covered at a certain percentage level with annual caps on specific services.
As a result of a divorce, my biological child is living with their other parent . Are health expenses for him/her deductible under a PHSP?
No. Covered Employees may only claim expenses for individuals who are living in their household full-time. “Your household” means your principal home at a single address where the full-time occupants (regardless of age) are dependent upon you for their living expenses. This is not the same definition as “Dependent” used in many other tax-related discussions.
Can I deduct the cost of all my activities that are proactive healthy pursuits, such as sports registration, gym memberships or swimming lessons?
No. A PHSP is intended to cover the cost of health services and treatments provided by medical practitioners. Speak to your accountant or tax professional for possible methods of deducting all or part of these sorts of activities.
Are vaccinations or shots for travel overseas an eligible expense for our PHSP?
Yes, as long as they are prescribed and delivered by a nurse or doctor licensed in your province.
As it relates to travel to foreign countries for business, are premiums for travel medical insurance a deductible expense on a navancorp PHSP?
Yes, Travel Insurance for personal injury or medical expenses is an eligible expense. Other travel-related insurance that is not specifically for health expenses is not covered. For example, flight cancellation insurance and liability insurance are not eligible expenses.
What is the definition of a “medical practitioner” for services that are eligible under a navancorp PHSP?
A medical practitioner is an individual registered as such by the appropriate provincial or national governing body for that profession, such as a College or Association. Further clarification is provided by the CRA Income Tax Folio S1-F1-C1: Medical Expense Tax Credit. CRA also provides an excellent online reference list of authorized medical practitioners by province or territory for the purposes of claiming medical expenses.
Claim Submission Process
Do we have to send the original medical receipts or are photocopies acceptable?
As a general rule navancorp requires original receipts for our records. We do however recognize that they may not be available in some situations and we will accept photocopies of receipts on occasion. We do not suggest that you send photocopies routinely. If any expenses are disallowed, we will return the original receipts to you. We do strongly recommend that you make photocopies of the receipts as postal mail does occasionally get misdirected.
Do we have to submit a claim form for each separate member of the family for a Covered Employee?
No. You can mix children and spouses on the same claim form. The reimbursement direct deposit or cheque will be directed to the payee employee shown on the top of claim form.
I have expenses for last year and some for this year. Do I have to make separate claims for each fiscal year?
The medical service date is only used to ensure it is after your plan’s Effective Date. The navancorp transaction date is recorded as the day the claim is received at our office. If you miss a particular health expense it can always be claimed the following year, and will apply to your business taxes in the year it was claimed.
How long after our fiscal year end date do we have to submit our expenses for the year?
Since it is the transaction date with navancorp (not the medical service date) that determines to which fiscal year the expense will apply, we would ideally expect to receive all expense claims on or before your year-end date. If you are expecting a large expense near your year-end that you wish to deduct in that year, please contact us in order to make special arrangements.
One of my Covered Employees has a large expense which exceeds the amount that I have budgeted to cover in a year on our PHSP limit. How do I deal with this?
A navancorp PHSP allows you, the business owner, to flexibly accommodate special circumstances. If It is an eligible expense, the employee can submit the expense in smaller pieces over several years until it is fully reimbursed. Over time (depending on the budget amount allocated within the PHSP) the employee will have been reimbursed for the expense while not exceeding your company budget for the PHSP. Orthodontics (braces, etc.) is a good example of when this sometimes happens.
How often can claims be submitted? Is there a time limit or a minimum claim amount?
At navancorp you may submit as often as you like, for any amount you like. There is not a minimum claim amount or restrictions on frequency -- the cost is simply a percentage of the claim. At navancorp there are not any surcharges or hidden fees if you make small claims or submit numerous times. Note that some providers charge a higher fee for claims which fall below a minimum dollar amount. Not at navancorp – yet another competitive advantage that we offer our clients.
When a claim is submitted that was paid by credit card, do I include the bank receipt?
Do I get my original receipts back once submitted them to navancorp?
No, navancorp securely retains the original receipts for 7 years then disposes of them. This is in case the Canada Revenue Agency requests them for review. If you require the original receipts (eg. warranty issues with a claimed medical device), we will be happy to return the originals at no cost to you (and keep photocopies) – simply get in touch with us. We do encourage you to keep your own photocopies of all receipts prior to submission to protect against loss/delay by the postal service.
Do you accept MasterCard, American Express or Visa for claim payments?
No. In order to keep administrative fees down, we only accept cheques or electronic cash transfers (EFT/ACH, Interac, PAD, etc.) for claim payments. Since we require the original medical receipts to be sent to us by mail, a credit card transaction would not speed up the claim processing time. Note that we do however accept Visa and Mastercard for the initial $49 enrollment fee (waived if you are moving from another provider).
I have a large claim requiring multiple pages. Can I send one lump sum cheque, or do I need to send one check for each page of claims?
Yes, you can send one lump sum cheque for the entire claim, regardless of how many pages. TIP: Copy the amount of the “Total Claim” (not the “Total Fee Payable”) from the first page of the claim form into the first amount on the first line of the subsequent page using the descriptor “Balance Forward”. By doing this for each subsequent page, the last page will have the correct “Total Fee Payable” for the entire claim.
What is the monthly premium for a navancorp PHSP?
There are absolutely no monthly premiums. Truly "Pay as You Go!"
What are the costs for a navancorp PHSP?
All PHSP costs are covered by the Employer:
one-time Enrolment fee of $49 (no taxes) for new plans – waived if you are moving from another provider
10% Administration Fee on claims, plus applicable taxes
No other hidden costs or monthly premiums
Does it cost anything to change my list of Covered Employees?
No. You can simply send us an email or include your changes with your next claim and we will update the records at no charge. Plan changes never incur costs. Our 10% administrative charge (and $49 one-time enrollment fee) covers all costs for a navancorp PHSP. Another reason why navancorp should be your PHSP provider of choice.