A Quick Look Into How Cost Plus Works With Your Group Plan
I know you’re probably thinking ‘what the heck is Cost Plus and how is it beneficial to me?’ Let’s start by saying as brokers, we acknowledge that there’s a myriad of options available in the marketplace. Some solutions are far more complex than other and Cost Plus just happens to be one of the more simplistic offerings.
Cost Plus is a cost effective and tax efficient means of paying for health and dental expenses, often supplementing existing group benefits.
Cost Plus is available through many benefits providers, including your Chambers of Commerce Group Benefits Plan and here is a quick look at how it works. As a business owner, you can use your Cost Plus account for health and dental related items not covered by your group plan, including the remainder of claims that you must pay out of your own pocket for things like maximums and co-insurance. I’ve put together two examples to give you an idea of how it works:
You go to the dentist and your bill is $1000 – your group plan has a co-insurance rate of 80% for these services. You pay $200 out of pocket (with after-tax income) and your plan covers the remaining $800. With Cost Plus, you then submit the $200 out of pocket expense receipts to your benefits provider. Since the expense is aligned with CRA’s guidelines, your corporation pays the expense (plus a nominal admin fee and tax), and you’re personally reimbursed, tax free, for the $200 expense.
Expenses Beyond Your Maximums
Your spouse requires paramedical treatments (ie. chiropractic, massage therapy, etc.) beyond the $500 annual limit established within your plan design. The maximum is reached in June, but treatment is still required for the balance of the year. You accumulate the receipts for these services which were paid for with after-tax income. They total $750 in paid service. Similar to before, your corporation pays your provider this amount, plus a fee and tax, and you personally receive a tax-free reimbursement.
There are stipulations within the tax act that as a business owner you should be aware of relating to the proper use of Cost Plus. We encourage you to consult your accountant and benefits expert for details.
Similar to employee benefit plans, when administered properly, Cost Plus can be a powerful tool!