Get Benefits That Grow With You

 Small businesses often start out with just the business owner, take on a part time employee or full time employee or two, and gradually grow as their opportunities expand.  But how can you grow your benefits plan hand-in-hand with your business?  Healthcare Spending Account (HSA) plans allow you to accommodate the diverse needs of your workforce while you grow, and at the same time protect you from unexpected (and unwelcome!) renewal increases.

Here are 5 ways that HSA plans solve challenges for growing businesses:

Build In Flexibility So You Can Stop Micromanaging

HSAs cover an amazingly wide range of eligible expenses.  This flexibility means you don’t have to worry about picky details like per-visit maximums, dispensing fee caps, and dental scaling units.  For a diverse and growing team, this also means each employee can choose how to spend their healthcare dollars according to their own family’s needs.

Keep Your Costs Predictable As Your Business Changes

HSAs have a fixed cost per employee, so as you hire a new team members you’ll know exactly what your total cost will be for wages, payroll taxes, and benefits.  For example, you might provide an HSA benefit of $1200 per employee per year.  The benefit amount will only increase when you decide to change it. Compared to a conventional insurance plan, with an HSA plan you can rely on your benefits costs – there’s no renewal increase at the end of the year.

Cover Family Members With No Termination Age

Many business owners plan to keep working as long as they can, but traditional benefit plans normally reduce or terminate coverage at age 65 or 70.  Particularly for family businesses where parents frequently continue working as the next generation joins them, these kinds of restrictions create a problem.  HSA plans have no termination age requirements, which makes them an ideal way to continue coverage regardless of age.

If you’re a business owner worried about finding the right benefits coverage that can keep pace with your growth, HSAs are a great answer that won’t blow the budget.  Call Beagle Benefits for help with structuring a flexible and reliable benefits plan that will grow with your business.

The Hidden Incentives for Fraud

Your benefits plan could contain hidden incentives which unintentionally encourage abuse and even fraud.  The resulting costs drive up benefits plan premiums for everyone. The Canadian Life and Health Association estimates between 2% and 10% of healthcare dollars are lost to fraud. Patterns of abuse and fraud in benefits claims persist, even though people consistently rate themselves as honest and fair (in fact people tend to rate themselves as more honest than they rate others) while at the same time abusing their benefits plan.  The question is why do people act this way?

When an individual feels entitled to claim as much as they can, they may be tempted by services they don’t actually need, and some medical providers will exploit this attitude.  For instance, to keep a patient returning for treatment after a plan maximum is reached, an unscrupulous practitioner might issue receipts in the names of different family members even though knowingly falsifying claims in this way is considered fraud.  Another recent high-profile example of healthcare fraud involved a scheme in which an orthotics provider and its customers split the proceeds of false claims.

Whose Money Is It Anyway?

The idea of “easy money” can be tempting, and some service providers might try take advantage.  Because employees can often be persuaded to spend more when benefits coverage is available, practitioners may have an incentive to offer unnecessary products or services with high dollar values.  When it seems like you’re spending someone else’s money, there’s less motivation to shop around.  That’s why a TENS machine available for $150 through a medical supply company can be sold for $500 at a rehabilitation clinic.

There’s an assumption that excess claims are just being paid by the big insurance company.  But in fact, these costs are borne by each employer, and when cost-sharing is in place, co-workers bear the brunt of fraud and abuse as well.  Insurance companies are not in business to lose money so the impact of fraudulent claims is reflected in higher premiums at renewal each year.

How Can You Protect Your Plan?

Employers may be tempted to react to rising benefits costs by drastically curtailing or even cancelling their benefits plan.  However a properly designed and reasonably funded plan, including strategic options like a healthcare spending account, can enable employers to provide good coverage for their employees while protecting their plan from the risk of fraud and abuse.  

Healthcare spending accounts (HSAs) provide an excellent alternative by putting the employee in charge of their own budget.  Each employee’s HSA is limited to an overall annual maximum set by the employer for each class.  As employees claim throughout the year, their remaining balance decreases.  With an HSA there is less incentive for abuse, as fraudulent claims would only reduce the amount an employee has left for legitimate expenses.

Unlike a traditional plan, HSA plan funding assumes that each employee will claim 75% to 100% of the dollars available – but will claim for those items their family genuinely needs rather than trying to spend as much as possible across many categories of maximums.  The funds committed to an HSA plan can therefore be based on average claims.  Employers gain cost control, with the built-in flexibility to better respond to the needs of a diverse workforce.

Strategic plan design can help by changing the incentives to commit benefits fraud.  The key is to look for ways to link the impact of spending decisions to the direct interests of the individual employee.

Talk to us about plan designs that will help to remove incentives for abuse and keep your benefits plan affordable over the long term.

The professionals will know.  A do-it-yourself plan runs the risk of expenses being disallowed.  Employees would then be on the hook for the taxes owing on what should have been a tax-free benefit under a correctly managed plan.

Privacy Considerations

A single business owner managing expenses just for their family may have no privacy concerns.  But once the business expands to include employees, the privacy of each person’s claims must be maintained.  In addition to the requirements under the Personal Information Protection and Electronic Documents Act (PIPEDA), no one wants to hand in their prescription receipts to their boss for reimbursement!  By outsourcing your benefits plan to a third party, employees can submit their claims with the confidence that their private information is protected.

Time and Cost of DIY

If you’re spending time reviewing and reimbursing employees’ medical expenses, you’re giving up time that can probably be better spent running your business.  Businesses routinely rely on external professional providers for their expertise, like accounting and legal advice, web development, and marketing to name a few.  Putting your benefits plan management into the hands of a professional provider will save time as well as protect you from potentially costly mistakes.  When evaluating the expense of a benefits plan it’s important to remember that the full cost of a properly managed plan is deductible to the business, including the admin fees and taxes.

Corporate Tax Requirements

Processing your company’s benefits expenses internally also means correctly calculating and remitting all applicable taxes.  PHSPs in Ontario are subject to provincial insurance tax, premium tax, and potentially HST if it’s a self-funded plan.  What percentages are charged on what parts of a benefits plan?  If you get it wrong, incorrect taxation can result in back-charges and penalties at the provincial or federal level. Insurers and professional third party administrators will make sure the applicable taxes are calculated and paid correctly for all benefits included in your plan.

Although it may be tempting to try and avoid administration fees by running benefits expenses through your business, the time it takes away from your core operations and the high cost of potential errors can quickly add up to more than it’s worth. Protect your business, your employees, and your time by calling in the professionals to do the job right.  Talk to Beagle Benefits about finding the best provider for your benefits plan.

Perks & Benefits … Taxable or Not?

The holiday season is fast approaching!  Holiday parties, end of year gift cards, and other rewards are some of the great perks that employees look forward to at this time of year.  But for business owners, this also means employee T4s aren’t far behind, and sorting out taxable benefits becomes one more item on the To Do list.

What’s Taxable …

     Cash or near-cash awards  
Things like gift certificates and cash holiday bonuses are taxable.

     Insurance premiums
An employer’s contributions on behalf of employees for Life Insurance, AD & D, and Critical Illness insurance are taxable.

What’s Not …

     Non-cash gifts and awards
Gifts and awards under $500 per year are non-taxable when they are for special occasions or recognition, not for job performance.

     Cell phones 
Personal use of a company cell phone is non-taxable as long as the cost is reasonable, and personal use doesn’t result in extra charges.

     Auto allowance 
Reimbursement for the use of a personal vehicle for business travel is non-taxable, assuming a reasonable rate per kilometer.
(in 2017, 54¢ for the first 5000 km and 48¢ thereafter)

     Professional membership fees
Memberships or association dues are non-taxable, as they’re often a condition of employment and are generally understood to benefit the employer.

It Depends …

     Holiday party
Taxability for events like holiday parties depends on monetary limits:
If you’re spending up to $100 per employee, the amount paid is non-taxable to your employees.
But if it’s a lavish bash that adds up to more than $100 per employee, the entire amount is taxable.

     Retirement savings contributions
Taxability of amounts paid by the employer on behalf of employees depends on the nature of the plan:
Employer-paid contributions to pooled registered pension plans are non-taxable.
Employer-paid contributions to RRSPs (and administration fees) are taxable.

Take good care of your business and your employees at tax time by correctly recording taxable and non-taxable perks and benefits.  We hope these tips will be useful when you’re wrapping up payroll at year-end, but of course you should still consult with your accountant or financial advisor if you have tax questions.  If you’re thinking about introducing or changing benefits in the new year, give us a call.