Alan Friesen here certified Employee Benefits specialist with another tip to help you get the best value out of your employee benefit program. This tip is about health spending accounts or cost plus arrangements with these type of vehicles. Really, it's not insurance. It's just a way to optimize your tax on services that you or your family need. And the the most appealing thing about health spending accounts is that they're very versatile. If there's three people in our company, there's Tom and Bill and john and Tom and Bill and john all have different needs if they all have $1,000 in their health spending account.

Tom can use it on massage therapy and Bill can use it on laser eye surgery and and Jim whoever I said was a third guy. Use it on orthodontic work for his daughter as an example. So they're great in meeting diverse needs. The The other option about them or the other big advantage about them is that they are scalable. You can allocate different amounts for different individuals. But further you can even negotiate with your employee and come up with a beneficial arrangement that is good for both of you.

So here's a good example. Let's say that we have Tom's auto body and Tom's auto body has Keith, their star employee. And Keith says, gee, Tom, I need to have orthodontia braces for my daughter. And I know that's going to run the $6,000. any way that we can add something like that on our employee benefit plan, and maybe the plan is too small to have orthodontia coverage. Maybe it doesn't make sense that everybody's got to pay the premium when it's only going to benefit Keith, those kind of things.

So Tom might say, Tom, or Keith, I can't pay you any more than I could pay you. I can't change the benefit plan. But here's what I will do for you. We're paying you $70,000 a year right now. Instead of How about we pay you 64,000 and then put 6000 into a health spending account for you. And then you can use that $6,000 to pay the orthodontist for the braces for your daughter.

So if you do the math on this, this works out very, very well for employer and employee, how it works out well for the employee is that on his marginal tax rate, so instead of 70,000, his earnings are 64,000. So we change he he saves the tax on his marginal the marginal tax rate on that earnings that $6,000. So let's say his marginal tax rate is 40%. So then he's gonna save 40% of the $6,000 or 20 $400. So you might say, Well, wait a minute, he can also claim that instead of the health spending account, he could claim that on his personal income tax return, and that is very true. However, the limitations there that Canada Revenue he puts on it are substantially different and here's how it works.

The first 3% cannot be claimed. So again, if his earnings are 70,000, the 3% he can't claim so that's 20 $100. So of that $6,000 expense, you take off the 2100, you can't claim that leaves 30 $900 remaining, the 30 $900 remaining, you can only get a tax credit and the tax credit is 15%. So if you do the math, the the way of deferring income and putting it into a health spending account, you save 2400. If you do it through a personal income tax return, your savings are under 600. So a fairly significant difference advantage by putting it through the health spending account.

Now as much a fan I am of health spending accounts or cost plus arrangements, I don't see them as being a vehicle that you want to use solely. I see them as being a top up to look after extra things that might occur, especially extra things that you can budget around. I'm a big fan of having an underlying insured component and then the health spending account to pick up the additional things that that you can plan. For. So I hope that messages have helped you of assistance to you. If I can help, please do give me a call.

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