What is an Olympia Health and Dental Plan…And what is Plan ONE?
In technical terms, an Olympia Health and Dental Plan is a Private Health Services Plan (PHSP). This fancy term and concept originated with the Canada Revenue Agency. The cryptic details of CRA's PHSP (now that's a mouthful) explain that under specific conditions a business owner can use their corporation to pay for all of her personal health and dental expenses. In a nutshell: the corporation deducts the expenses and then she receives the benefit tax free.
Plan ONE is Olympia's unique take on the PHSP concept. Olympia created Plan ONE to simplify and deliver the intended benefit of a PHSP — mainly to lower medical costs and reduce taxes for Canada's small business community.
Plan ONE is a health and dental plan designed for a corporation with one employee, typically the business owner. Two employees is the exception when the spouse of the owner is employed by the corporation.
Why choose an Olympia Health & Dental Plan?
Plan ONE offers complete coverage for you and your family. The claim process is easy and turnaround for a claim is less than 72 hours. Plan ONE will significantly reduce your medical costs and lower your personal taxes. There are no premiums and you are in control. Plan ONE is flexible and adaptive to the small business owner.
Answer: Plan ONE is the best health and dental plan for small business.
How do I join and what does Plan ONE cost?
You can sign up online or you can speak with one of our representatives.
To join Olympia there is a one-time setup fee of $335 for your corporation and $40 for each employee. When you are ready to make a claim, Olympia charges a 10% administration fee on the amount of your claim. There are no other costs involved with your plan. The prices do not include GST/HST.
How does Plan ONE work?
Let's use an example of a $3,000 health and dental expense.
Step 1 — Pay for the health and dental expense personally. This payment is made from a personal account. Let's say with your personal credit card. ($3,000) Then complete a claim form.
Step 2 — The Corporation sends Olympia the claim form and funding plus the 10% administration fee. This payment is from a Corporate account. Let's say an online deposit from your business bank account to Olympia. ($3,300)
Step 3 — Olympia reimburses you personally for your original personal expense. Let's say through direct deposit to your personal bank account. ($3,000) The $3,000 reimbursement is tax free. The $3,300 payment from your corporation is deductible.
OK. It looks like I'm paying for the expense twice.
Darn it! You're onto us. We were hoping you wouldn't notice.
All humor aside, there are two payments. The important matter at hand is to understand why there are two payments and what purpose it serves.
Imagine wearing two hats — one as the employee (personal) and one as the employer (corporation). The first payment is a personal expense paid to the provider. The second payment is a corporate expense paid to Olympia for your personal reimbursement.
From a technical aspect (remember Plan ONE is linked with CRA and we all know their fondness of technicalities), there must be a distinguishing relationship between the employee and the employer in order for your plan to meet the requirements set forth by CRA. In other words, Olympia needs to clearly recognize participation from you (the employee) and your corporation (the employer).
Answer: Qualify for CRA
Then how am I saving money (what purpose does the plan serve)?
Please bear with us on this explanation. As Plan ONE is interconnected with taxes, we will once again have to delve into the realm of taxes to answer this question. As if the topic of health insurance was not complicated enough, now we have to talk about taxes.
Many small business owners are unaware that health and dental expenses are paid with "after tax" dollars. This jargon means that your $3,000 dental bill involves a significantly higher and hidden cost to your business.
"After tax dollars" means just that – dollars after tax. Depending on your personal (marginal) tax rate, $3,000 after tax may cost your corporation over $4,688. The logic here is that you must pay yourself $3,000 in salary or management fee, and then pay the government approximately 40% in tax ($1,688). You then have $3,000 "after tax" to pay your medical expense.
In the example above using plan ONE, the net cost to your corporation is $3,000 for the expense plus $300 for the 10% administration fee. Your corporation reimburses you $3,000 (tax free) for your initial personal expense. If you pay for your medical expense with "no plan" the net cost to your corporation is $4,688.
Answer: My company and I save money because Plan ONE allows me to expense my personal medical bills through my company.
Look at the diagram below for a visual representation.
How much will I save on health and dental costs?
The short answer is that you can save up to 30% on every medical dollar you spend. Bear with us as we give you the long winded version.
As Plan ONE is interconnected with a PHSP, we inevitably have to talk about taxes. Your savings will depend primarily on your income level and the amount of your health and dental expenses. The higher your income and cost of medical expenses, the more you save.
See the example below for further explanation.
With Plan ONE, your corporation will save $1,333 on a $2,000 medical expense.
Try our savings calculator to determine savings for your circumstance.
How much can I spend in a year?
The business owner receives a benefit limit of $15,000 per year. The spouse also receives $15,000 per year if they are an employee. The benefit limit is pooled for the entire family meaning the limit is shared amongst the family.
Medical Expense Tax Credit (METC)
The METC is available through CRA as an aid for your personal medical expenses. Often a person will confuse the METC with "writing off my medical expenses". The fact of the matter is there is an incredible threshold in order to be eligible for the METC. Once the threshold has been met, the credit is negligible compared to Plan ONE.
To be specific, the threshold is the lesser of 3% of your net income or $2,024. You then receive a non-refundable tax credit at the lowest marginal tax rate of your province on the amount of your medical expenses exceeding the threshold. For further information please click here.
All said and done, the METC does not provide a meaningful savings compared to Plan ONE.
Private Health Services Plan (PHSP)