assureflex health spending account the evolution of health and dental care benefits

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1 assureflex health spending account the evolution of health and dental care benefits Savings Comparisons Assureflex Corporation Post Office Box 81, Strathroy, Ontario N7G 3J1 telephone: (519) local to London and area toll free: (866) in Ontario only website: Copyright 2016 All Rights Reserved

2 2016 Ontario Combined Marginal Tax Rates up to $ 41,536 = % $ 41,536 to $ 45,282 = % $ 45,282 to $ 73,145 = % $ 73,145 to $ 83,075 = % $ 83,075 to $ 86,176 = % $ 86,176 to $ 90,563 = % $ 90,563 to $140,388 = % $140,388 to $150,000 = % $150,000 to $200,000 = % $200,000 to $220,000 = % over $220,000 = % 2016 Ontario Payroll Deductions and Expenses Worker's Compensation to $88,000 of Taxable Income Ontario Holiday Pay 4.000% minimum on Taxable Income Employment Insurance 1.880% Employee to $50,800 Taxable Income Employment Insurance 2.632% Employer to $50,800 Taxable Income CPP 4.950% Employee and Employer to $54,900 Taxable Income Ontario Health Premium $ 20,000 to $ 25,000 $ (income - $ 20,000) x 6% = $ 0.00 to $ $ 25,000 to $ 36,000 $ $ 36,000 to $ 38,500 $ (income - $ 36,000) x 6% = $ to $ $ 38,500 to $ 48,000 $ $ 48,000 to $ 48,600 $ (income - $ 48,000) x 25% = $ to $ $ 48,600 to $ 72,000 $ $ 72,000 to $ 72,600 $ (income - $ 72,000) x 25% = $ to $ $ 72,600 to $200,000 $ $200,000 to $200,600 $ (income - $200,000) x 25% = $ to $ $200,600 plus $ The following is a comparison of Employer expenses (per $1,000.00) for various options to provide Employees and Executives with tax free benefits for Healthcare. If an Employer is going to provide Health and/or Dental Care benefits to Employees (including Executives), the Assureflex HSA option will always be less expensive. Page 1 of 5

3 Assureflex Health Spending Account to provide an Employee with $1, per Calendar Year $1, Premium less $ Administration = $1, for Claim Employer Expense = Cost of Claims plus % (plus Ontario Taxes) Ontario Taxes are: 13% HST is charged on Assureflex Administration Fees. equals $ % PST is charged on total Claims submitted and processed. equals $ % Premium Tax is charged on Claims plus Administration. equals $ Total Ontario Taxes: equals $ $1, Premium plus $ Ontario Taxes = $1, total expense Employer Expense = Cost of Claims plus % (incl. Ontario Taxes) 13% HST is usually recoverable as Input Tax Credit (ITC), so total expense equals: $1, Premium plus $ Ontario Taxes = $1, total expense Employer Expense = Cost of Claims plus % (incl. Ontario Taxes) Assureflex plans are used to provide: 1. additional non-taxable Executive Compensation, and/or 2. additional non-taxable Employee Compensation, and/or 3. instead of (replace) insured Health and/or Dental plans Compared to an Employer Salary Payment Option Assureflex saves 3.5% plus Payroll Deductions and Expenses, at lowest salary levels Assureflex saves 93.5% plus Payroll Deductions and Expenses, at highest salary levels Compared to and Employer Group Insurance Option Assureflex saves 3.5% plus 8% Ontario Sales Tax, at about 50 plus group participants Assureflex saves 45.2% plus 8% Ontario Sales Tax, at about 3 to 10 group participants Page 2 of 5

4 Employer Salary Payment Option to provide an Employee with $1, per Calendar Year If they earn up to $41,536/yr., Employees have a combined Marginal Tax Rate of 20.05%. Employer pays $1.25 Salary (less 20.05% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus a 25% Tax Penalty, plus Payroll Deductions and Expenses. If they earn $41,536 to $45,282/year, they have a combined Marginal Tax Rate of 24.15%. Employer pays $1.32 Salary (less 24.15% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus a 32% Tax Penalty, plus Payroll Deductions and Expenses. If they earn $45,282 to $73,145/year, they have a combined Marginal Tax Rate of 29.65%. Employer pays $1.42 Salary (less 29.65% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus a 42% Tax Penalty, plus Payroll Deductions and Expenses. If they earn $73,145 to $83,075/year, they have a combined Marginal Tax Rate of 31.48%. Employer pays $1.46 Salary (less 31.48% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus a 46% Tax Penalty, plus Payroll Deductions and Expenses. If they earn $83,075 to $86,176/year, they have a combined Marginal Tax Rate of 33.89%. Employer pays $1.51 Salary (less 33.89% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus a 51% Tax Penalty, plus Payroll Deductions and Expenses. If they earn $86,176 to $90,563/year, they have a combined Marginal Tax Rate of 37.91%. Employer pays $1.61 Salary (less 37.91% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus a 61% Tax Penalty, plus Payroll Deductions and Expenses. If they earn $90,563 to $140,388/year, they have a combined Marginal Tax Rate of 43.41%. Employer pays $1.77 Salary (less 43.41% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus a 77% Tax Penalty, plus Payroll Deductions and Expenses. If they earn $140,388 to $150,000/yr., they have a combined Marginal Tax Rate of 46.41%. Employer pays $1.87 Salary (less 46.41% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus a 87% Tax Penalty, plus Payroll Deductions and Expenses. If they earn $150,000 to $200,000/yr., they have a combined Marginal Tax Rate of 47.97%. Employer pays $1.92 Salary (less 47.97% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus a 92% Tax Penalty, plus Payroll Deductions and Expenses. If they earn $200,000 to $220,000/yr., they have a combined Marginal Tax Rate of 51.97%. Employer pays $2.08 Salary (less 51.97% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus 108% Tax Penalty, plus Payroll Deductions and Expenses. If they earn over $220,000/yr., Employees have a combined Marginal Tax Rate of 53.53%. Employer pays $2.15 Salary (less 53.53% Income Tax) for Employee to have $1.00 to spend. So, that s cost of Healthcare plus 115% Tax Penalty, plus Payroll Deductions and Expenses. Page 3 of 5

5 Group Insurance Option to provide an Employee with $1, per Calendar Year % Target Loss Ratio groups of about 50 plus participants $1, Premium less $ Administration = $1, for Claim Employer Expense = Cost of Claims plus 25.00% (plus 8% RST in Ontario) Whether Claims increase or decrease, at the 80.00% Target Loss Ratio, Premium Expense = Cost of Claims plus 25.00% (plus 8% RST in Ontario) % Target Loss Ratio groups of about 25 to 50 participants $1, Premium less $ Administration = $1, for Claim Employer Expense = Cost of Claims plus 33.33% (plus 8% RST in Ontario) Whether Claims increase or decrease, at the 75.00% Target Loss Ratio, Premium Expense = Cost of Claims plus 33.33% (plus 8% RST in Ontario) % Target Loss Ratio groups of about 10 to 25 participants $1, Premium less $ Administration = $1, for Claim Employer Expense = Cost of Claims plus 50.00% (plus 8% RST in Ontario) Whether Claims increase or decrease, at the 66.67% Target Loss Ratio, Premium Expense = Cost of Claims plus 50.00% (plus 8% RST in Ontario) % Target Loss Ratio groups of about 3 to 10 participants $1, Premium less $ Administration = $1, for Claim Employer Expense = Cost of Claims plus 66.67% (plus 8% RST in Ontario) Whether Claims increase or decrease, at the 60.00% Target Loss Ratio, Premium Expense = Cost of Claims plus 66.67% (plus 8% RST in Ontario) note Target Loss Ratio equals Claims as % of Premiums, and varies depending primarily on group size. Page 4 of 5

6 Medical Expense Tax Credits Option Some individuals feel that they can already receive reimbursement for their Medical Expenses by claiming Non-refundable Medical Expense Tax Credits on the individual Income Tax Form. However, waiting for the once per year opportunity to calculate that nothing (or next to nothing) is available, is a less than satisfactory process. This is an example of claiming Medical Expenses (as a Medical Expense Tax Credit) on individual Income Tax Forms (at year end), as compared to claiming the Expenses through Assureflex (as incurred). Waiting for up to one year to get the refund is not as effective as receiving about 10 to 20 times the amount immediately from Assureflex. Medical Expense Tax Credits could be claimed when completing Income Tax forms. The Claim is the amount that Qualifying Medical Expenses exceed 3% of Net Income, times the lowest available Income Tax rate (combined Federal and Provincial rates). Most individuals will find that this Tax Credit results in little or no actual refund. Example of Tax Credit and Assureflex Refund at $30,000 Net Income Medical Expenses $ 2, less $900 (3% of Net Income) equals $ 1, at 20.05% (lowest Tax Rate) equals Medical Expense Tax Credit of: $ equals 12.83% compared to, Assureflex Non-taxable Refund $ 2, equals % Example of Tax Credit and Assureflex Refund at $45,000 Net Income Medical Expenses $ 2, less $1,350 (3% of Net Income) equals $ 1, at 20.05% (lowest Tax Rate) equals Medical Expense Tax Credit of: $ equals 9.22% compared to, Assureflex Non-taxable Refund $ 2, equals % Example of Tax Credit and Assureflex Refund at $60,000 Net Income Medical Expenses $ 2, less $1,800 (3% of Net Income) equals $ at 20.05% (lowest Tax Rate) equals Medical Expense Tax Credit of: $ equals 5.61% compared to, Assureflex Non-taxable Refund $ 2, equals % Medical Expense less than 3% of Net Income results in no Medical Expense Tax Credit lowest Tax Rates, equals 15.00% Federal and 5.05% Ontario, equals 20.05% total. Page 5 of 5