In October 2006, the Contractors and Independent Consultants SIG welcomed Wallace Murray, a professional financial advisor who specializes in health insurance, to tell us more about health and dental benefits for contractors.
Wallace described several types of health and dental plans:
A Group or Company Plan is owned by the company, and the employee has coverage only while employed. Currently STC members in Canada do not have access to a group plan, but other associations do (one example is the Vancouver Board of Trade).
A Conversion Plan. When you leave an employer, you often have the option to take some health benefits with you, with no health underwriting. You pay the premiums for this coverage yourself. You must exercise this option within a defined grace period, which is usually 15 or 30 days. You may find this useful to use as a bridge, perhaps if you are making the leap into self-employment or have health issues (remember, there is no health assessment and no medical is required). Typically the options are quite limited. Conversion plans usually only cover limited health and dental coverage and life insurance. Premiums are a tax deduction.
An Individual Plan is owned by you. Most plans require you to give a detailed medical history and often ask for a medical examination as well. Some insurers offer flexible plans, where you can pick your options.
A Health and Welfare Trust (sometimes called a health spending account) enables you to claim health and dental costs as a tax deduction. This should not be confused with the tax credit that CCRA affords all taxpayers. There is no monthly premium and no health assessment; however you must operate through a trust. Several companies offer this service, including HUB Financial. Your financial advisor or accountant may also be able to set up a trust for you. Self-employed individuals are limited to tax deductions of $1500 each year, but there are no limits for incorporated companies. You do all the administration for this type of trust, including making payments, completing forms and claiming the deduction. Many financial service providers insist that sole proprietors also take out additional stop loss insurance and travel medical at a nominal cost.
A lively discussion followed the presentation.
Wallace Murray is a professional financial advisor. You can contact him at .(JavaScript must be enabled to view this email address) or 778-885-4607.
This article is not meant to offer financial advice. Please contact your financial planner for professional advice.
