After starting a successful business, every entrepreneur begins to wonder about whether they can now afford health and dental coverage.
They may have given up employer benefits in order to pursue their dreams, but now they may have a big dental appointment upcoming and they want them back.
So what is the most effective health and dental insurance for family business?
A Health Spending Account (HSA) is a plan set up between an employer and an administrator for the tax-free reimbursement of medical and dental expenses. It is not an insured plan, but allows an employer to provide benefits in a tax-effective manner under Section 248(1) of the Income Tax Act.
This is fast becoming one of the most popular methods for entrepreneurs to manage health costs. Any expenses that qualify for the Medical Tax Credit will qualify under an HSA. This includes a wide variety of items that range from laser eye surgery, to medical equipment and orthodontics (Note: cosmetic procedures are excluded from coverage.)
The financial advantage of an HSA is based on the fact that the money you deposit into your HSA is considered, by the government, as before tax dollars. Therefore, the amount deposited into your account lowers your total taxable income.
Flat annual fees or administration fees of 10% are charged on paid claims, and are the only ongoing costs, which makes an HSA a great option for the budget-conscious. All of the set-up and administrative fees, along with the paid claims, are deductible as business expenses.