One of the questions that comes up from time to time with SmallBiz Owners that are acutely tuned into watching their bottom-line is, “Why can’t I just reimburse my employees’ claims myself?”
This is a fair question. After all, most Health and Dental claims are pretty straightforward…Prescription Drugs; Dental visits; Chiropractor visits; etc…
However, there are some serious considerations that come into play when DIYing a self-directed Health and Dental benefits plan:
- It is a Taxable Benefit to the Employee – The Canada Revenue Agency is very clear on why it makes sense to have a third-party adjudicate Medical and Dental claim reimbursements: Medical expenses: “If you pay or provide an amount to pay for an employee’s medical expenses in a tax year, these amounts are considered to be a taxable benefit for the employee.”
- Expertise – as mentioned above, most Health and Dental claims are pretty straightforward. However, if the person managing the self-directed benefits plan makes any mistakes, there can be consequences, especially if an audit is done…the employee may end up having to pay taxes on the non-eligible reimbursement(s).
- Taxes – A third party Administrator of a benefits program will remit the appropriate taxes to the different levels of government that have their hand out. That nasty word “audit” comes into play again where, if an audit was conducted and mistakes were made…well, you know how messy any audit can get!
- Privacy – the Personal Information Protection and Electronic Documents Act (PIPEDA) and the Ontario Privacy Act came into effect January 1, 2004. Basically with this in place, an Employer should not know anything about the health of their employees and/or their dependent(s). So, if you are asking an Employee to submit their receipts for their Health and Dental claims, they could in fact file a complaint.
- Conflict of Interest – If a claim is disputed, then how will it be resolved without the inevitable finger-pointing?
- Resources – Probably a better idea to have the person you want to manage the self-managed benefits plan to spend their time and energy on what their good at, especially if it’s you, the SmallBiz Owner.
- Parameters – Last but certainly not least, is what parameters do you have in place and how are they documented? The last thing you want to do with the cost of Health and Dental expenses, especially high-cost biologic drugs is to leave the maximum wide-open!
If you want to DIY, just make sure you have all your ducks lined when it comes to Taxation; Privacy; Conflict of Interest; and Plan Design Parameters.
Located in Cambridge, ON Sharkey Group Insurance provides independent Employee Benefits advice & counsel for Small Businesses across Ontario.