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- Health and Welfare Plan
Download the Health & Welfare Plan (HAWP) Confidential Information Document (PDF)
Health & Welfare Trust
What is a Health & Wefare Plan?
Turning out of Pocket medical costs into corporate expenses: Income Tax Act 339R2 Sec. 118.2 (q,)118(3)(b), 248(1),6(1)(a),18(1)(a)
The Health and Welfare Plan is a cost plus plan without the plus. It provides expanded medical and dental coverage to, business owners, incorporated professionals their families and certain employees. The company essentially self insures to limits it deems appropriate.
Benefits
- Allows for cost control. In most cases each employee will be covered up to a certain dollar amount per family
- Follows CRA dependency rules. Parents and adult children may be covered.
- Exhaustive list of procedures covered, greatly in excess of basic group
- No administration costs.
- Administration done by company
- Not all employees must be members. Based upon classification of employment.
- All costs and claims fully deductible to corporation
- Low set up cost and no annual fee
Disadvantages
- Company must fund and you must offer to another class of employee other than shareholders
- Confidentiality less certain
- No catastrophic coverage.
The HAWT is an excellent means of covering the more expensive procedures such as orthodontics, which are not traditionally covered in Group Benefit Plans. They are also excellent for dealing with costly special situations. You must have at least one arms length employee given some benefits under the plan if they exist.
Covers: acupuncture, ambulance, artificial limbs, blood tests, braces, chiropractor, contact lenses, crowns, crutches, dental treatments, dentures, dermatologist, drugs, eyeglasses, guide dog, hearing aid & batteries, hospital bills, insulin treatments, naturopath, nursing, neurologist, obstetrician, O.R. costs, ophthalmologist, optician, oral surgery, organ transplant, orthodontics, orthopedic shoes, orthopedist, osteopath, oxygen, pediatrician, physician, physiotherapist, psychiatrist, psychoanalyst, psychologist, psychotherapy, radium therapy, massage therapy, sterilization, health care related transportation, vaccines, vasectomy, viagra, vitamins, wheelchair, X-rays, etc. etc. etcetera.
How it Works
The company will set up a special purpose trust to pay expenses not covered by basic medical/dental group insurance plans.
- The business owner/covered plan member pays the professional's bill completely.
- They then present the receipt to the office bookkeeper who makes the appropriate notation in the trust register. The corporation will then make a payment to the trust.
- The trust pays the business owner/covered plan member 100% of the bill
Important Details
The employer's contributions to the fund cannot be more than the amounts required to provide the benefits listed in the agreement. The Trust should be treated as a temporary holding account for the benefits already paid for by the employee.
The Health and Welfare Plan requires similar treatment for all members within a classification. For example, if the company wishes to make the HAWP available to directors then all directors must be included. If some employees are Shareholders the Plan must not be established for Shareholders only.
What are the key advantages?
- Contributions made to the HAWP are tax deductible to the company
- Out-of-pocket medical costs are turned into tax-deductible corporate expenses from dollar 1
- Reduced administration cost as the Plan is internally administered avoid the “plus”
- Flexibility in providing additional coverage for employees