WHITEPAPERS

Whitepaper: New CRA Guidance on Private Health Plans (PHSPs)

On July 24, 2015, CRA released a new Income Tax Folio S2-F1-C1 entitled Health and Welfare Trusts. This folio replaces and cancels IT Bulletin IT-85R2, Health and Welfare Trusts for Employees.

This information relates to Health and Welfare Trusts, which are used less often amongst private employers than many realize. Health and Welfare Trusts are used when funding for various benefits is done in advance and in a trusteed environment. Most private employers will simply fund benefit plan costs as they are incurred.

So why are we interested in S2-F1-C1: Health & Welfare Trusts?

In moments like these, CRA can take the opportunity to clarify administrative positions on various matters for taxpayers. Private Health Service Plans (more commonly known as health plans or health spending accounts) can live within a Health and Welfare Trust and there were a number of comments made about PHSPs within this folio. Here they are in summary:

Section 1.5 Private Health Service Plans.

CRA added the comment that there are no minimum employees that must be covered under a PHSP and referred readers to IT-339R2 for further reading. This helps dispel the myth that a plan needs more than one member and reaffirms IT-339R2 as a primary source document for CRA’s administrative position. One member plans are alive and well.

Section 1.4 Tax Implications to Employee-Shareholders.

Participation by employee-shareholders is affirmed and treatment as an employee contingent on three new items put into S2-F2-C1 as clarification.

First, benefit coverage needs to be comparable in nature, amount and cost-sharing to other similar-sized businesses who perform similar services and have similar responsibilities. This was not new, nor does it give much guidance on how much is too much when it comes to health plan limits. We continue to believe that reasonable plan limits would normally fall below $10,000 under most scenarios.

The second item stated that participation should be offered to all employees, or there should exist a logical explanation as to why it was not. This affirms our suspicions about CRA’s perspective on exclusionary plans. We continue to advise that excluding seasonal, non-permanent and/or part-time employees is fine, but solid reasons must exist to exclude other employees from the plan (which there often are).

And third, the benefit coverage for shareholder-employees should be comparable to non-shareholder employees who perform similar services and have similar responsibilities. Another perspective that we have followed, ensuring classes within the employees has terms, conditions and quantum that is logical and relative.

Conclusion

We welcome the additional clarity, especially when shareholder-employees are concerned. Single shareholder-employee plans continue to function, assuming plan terms and limits are reasonable. Further, creating plan classifications based on employment responsibilities continues to be feasible, again assuming rational separations between classes.

Whitepaper: New CRA Guidance on Private Health Plans (PHSPs)

On July 24, 2015, CRA released a new Income Tax Folio S2-F1-C1 entitled Health and Welfare Trusts. This folio replaces and cancels IT Bulletin IT-85R2, Health and Welfare Trusts for Employees.

This information relates to Health and Welfare Trusts, which are used less often amongst private employers than many realize. Health and Welfare Trusts are used when funding for various benefits is done in advance and in a trusteed environment. Most private employers will simply fund benefit plan costs as they are incurred.

So why are we interested in S2-F1-C1: Health & Welfare Trusts?

In moments like these, CRA can take the opportunity to clarify administrative positions on various matters for taxpayers. Private Health Service Plans (more commonly known as health plans or health spending accounts) can live within a Health and Welfare Trust and there were a number of comments made about PHSPs within this folio. Here they are in summary:

Section 1.5 Private Health Service Plans.

CRA added the comment that there are no minimum employees that must be covered under a PHSP and referred readers to IT-339R2 for further reading. This helps dispel the myth that a plan needs more than one member and reaffirms IT-339R2 as a primary source document for CRA’s administrative position. One member plans are alive and well.

Section 1.4 Tax Implications to Employee-Shareholders.

Participation by employee-shareholders is affirmed and treatment as an employee contingent on three new items put into S2-F2-C1 as clarification.

First, benefit coverage needs to be comparable in nature, amount and cost-sharing to other similar-sized businesses who perform similar services and have similar responsibilities. This was not new, nor does it give much guidance on how much is too much when it comes to health plan limits. We continue to believe that reasonable plan limits would normally fall below $10,000 under most scenarios.

The second item stated that participation should be offered to all employees, or there should exist a logical explanation as to why it was not. This affirms our suspicions about CRA’s perspective on exclusionary plans. We continue to advise that excluding seasonal, non-permanent and/or part-time employees is fine, but solid reasons must exist to exclude other employees from the plan (which there often are).

And third, the benefit coverage for shareholder-employees should be comparable to non-shareholder employees who perform similar services and have similar responsibilities. Another perspective that we have followed, ensuring classes within the employees has terms, conditions and quantum that is logical and relative.

Conclusion

We welcome the additional clarity, especially when shareholder-employees are concerned. Single shareholder-employee plans continue to function, assuming plan terms and limits are reasonable. Further, creating plan classifications based on employment responsibilities continues to be feasible, again assuming rational separations between classes.

Eligibility of Massage Therapy in Alberta

When determining whether a medical expense is eligible for reimbursement in a Health Spending Account (HSA), the criteria is the determination of acceptance under the Income Tax Act (ITA). If it is allowed by the ITA and can be claimed on the personal tax return, then it can be covered in an employer-sponsored Private Health Plan (PHSP/HSA). The ITA states that payments to qualified medical practitioners are eligible, but it does not expand upon which medical professions are considered qualified. The reason is because regulation and designation of medical professions is a Provincial jurisdiction. Currently in Alberta, while your acupuncture treatment (Acupuncturist) may be covered by your HSA, your massage therapy (Massage Therapist) may not be ineligible.

Brief Overview of Alberta’s Health Regulation System

Alberta regulates all health professions through Alberta Health and Wellness and, out of all the health professions that it regulates, the majority are governed under the Health Professions Act (HPA). Under the HPA, health professions are organized into regulatory bodies called “colleges” and are delegated powers and authorities for self-governance. The HPA requires that the colleges carry out governance responsibilities in a manner that protects and serves the public interest. The colleges would fulfil their responsibilities by: (1) setting entry requirements including education, training and examinations, (2) setting standards for professional practice, (3) setting continuing competency requirements, and (4) investing complaints and imposing disciplinary actions.

Current Status: Massage Therapist

Currently, there is no absolute regulatory body for the profession of Massage Therapy within Alberta. As a result, the market for a massage therapist is entirely on a “buyer beware” model. There are numerous and diverse training institutions offering programs anywhere from 250 hours of combined massage and reflexology up to 2200. It does not matter which end of the spectrum your training falls under in Alberta, at the end of the day, you can still call yourself a Massage Therapist, since the profession is unregulated, and therefore the title is unprotected.

Massage Therapy Regulation: Alberta

In mid-2009, three of Alberta’s massage therapy associations created the Transitional Steering Committee (TSC), whose sole objective is to initiate regulation of Massage Therapy. The TSC’s latest update was in July 2011. At that time the TSC was developing a Draft Practice Statement for the profession of Massage Therapy which would define and therefore regulate the professional services in the practice. With no time frame and divergent opinions, the process for the regulation of Massage Therapy has bogged down with no further updates as of Jan 2013.

History of Acupuncture Regulation: Alberta

The acupuncture profession has been regulated in Alberta by the Acupuncture Committee since 1988. In 2006, an interim council of the College and Association of Acupuncturists of Alberta (CAAA) was created from the collaboration of three professional associations: The Acupuncture Society of Alberta, the Alberta Association of Traditional Chinese Medicine Doctors and the Canadian Health Professions Acupuncture Society. On January 1, 2011, the CAAA officially replaced the Acupuncture Committee as the regulatory body for acupuncture in Alberta. Today, the CAAA remains the regulatory body of acupuncture in Alberta.