DisclaimerCopyright ©Benefits Interface, Inc.Accountant's Summary
Employee compensation is often comprised of taxable income, taxable benefits and non-taxable benefits. Health benefits are a favorite non-taxable benefit because the employer cost is a tax-deductible business expense and there are no tax consequences to the employees.
An employee would need to earn $2,000 in order to pay $1,000 of health expenses personally. A better alternative is to establish a health spending account to at a cost of $1,215 thereby saving $785.
Health benefits fall into one of two main categories; defined benefit (insurance) or defined contribution (health spending account). With a defined contribution health plan, the employer makes a predetermined monthly contribution for each class of employee and employees are reimbursed for any eligible expense. The cost of a health spending account is the sum of contributions plus 10% administration fee and 11.5% in taxes (taxes vary by province).
The unclaimed contributions to employee accounts rolled forward at the end of the calendar year and are refunded to the employer if not used by the end of the second year.
DisclaimerCopyright ©Benefits Interface, Inc.