Frequently Asked Questions
 
1.  I earn less than $30,000 per year, is it sensible to set up my own Self-Directed Benefit Plan TM?
 
2.  I pay no tax since I earn less than $7,000 per year, is it sensible to set up my own Self-Directed Benefit Plan TM?
 
3.  Should I check with my tax advisor about my own tax situation?
 
4.  I don't have any employees. Does this mean I can't set up a Self-Directed Benefit Plan TM?
 
5.  Is it sensible to set up my own Self-Directed Benefit Plan TM  if my spouse has a plan already?
 
6.  Can I send in a contribution only when benefit receipts are sent in?
 
7.  Is interest paid on the balance contained in my Accumulation Account?
 
8.  How much does the Self-Directed Benefit Plan TM  cost?
 
9.  Can my own Self-Directed Benefit Plan TM  have a retroactive effective date?
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.  I earn less than $30,000 per year, is it sensible to set up my own Self-Directed Benefit Plan TM?
For many people it will be sensible, particularly if you have children or live outside of Ontario (where no 8% sales tax is payable). For anyone paying federal and provincial income tax a contribution to your own Self-Directed Benefit PlanTM  will save about 22%-26%, depending upon your province. You will also avoid the CPP contribution of 9.4% (employer and employee portions). Right away this generates savings of more than 31%.

You also might save an additional 2-10% from government tax credits or payments (e.g. GST/HST Tax Credit) that are increased because your net income is kept lower since a Reimbursement Cheque from
Bene-D-Duct is not income. Check last year's tax form and consider whether you are receiving any government cheques.

If you have children (and for the same reason as last paragraph) you will receive an extra 5% from the Canada Child Tax Credit, and if you are receiving the National Child Benefit Supplement it will increase by between 9-32.5% depending upon whether you have one, two or three children.

So your potential savings are not small, in fact it could be 70%, which is larger than someone in the highest tax bracket!

You should also consider the value of the Medical Tax Credit when calculating your income tax on medical expenditures in excess of 3% of your net income. If you are not receiving any government tax credits or payments (e.g. GST/HST tax credit or Canada Child Tax Credit) then you may be better off paying for your medical expenditure directly.

There is no question that many personal circumstances impact on whether you would be better off with the Self-Directed Benefit PlanTM or not. Please read
Tax Aspects and the Case Studies , experiment with the  Calculators , and check last year's tax form. Finally if you have more questions then get in touch with your own tax advisor or ask us to review some of this information with you.
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2.  I pay no tax since I earn less than $7,000 per year, is it sensible to set up my own Self-Directed Benefit Plan TM?
If you have a spouse it probably would be sensible. Why? Because you are generating a spousal tax credit for your spouse that is reduced by any income that you earn. Reimbursement Cheques are not considered income and therefore your spouse will receive an extra credit worth about 22%-26% of the cost of the Self-Directed Benefit PlanTM. Also like the previous question a number of government support tax credits or payments will be increased by between 2%-32.5%. And you could avoid paying the 9.4% CPP contributions.

Lastly, the Medical Tax Credit will not be valuable to you (since you pay no tax), therefore the 3% threshold for this credit is based on your spouse's higher income.
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3.  Should I check with my tax advisor about my own tax situation?
By all means please do so. Each business has its own particular tax situation that we cannot completely anticipate (we can only talk about normal situations), so please confirm the tax deductibility of your contributions to Bene-D-Duct with your tax advisor if you are uncertain. Besides your tax advisor might become a customer, as well and start suggesting the Self-Directed Benefit PlanTM to other clients!
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4.  I don't have any employees. Does this mean I can't set up a Self-Directed Benefit Plan TM?
If you are incorporated you may still do so even if you are your corporation's only employee. Only an unincorporated proprietor needs to have at least one employee before a Self-Directed Benefit PlanTM can be set up. A sole proprietor may wish to buy an insurance company's benefit plan in order to receive the tax benefits of a PHSP.
benefit deductionsTop

 
5.  Is it sensible to set up my own Self-Directed Benefit Plan if my spouse has a plan already TM  if my spouse has a plan already?
Does your spouse have to pay for the plan? If so, your spouse is using after-tax dollars to buy benefits and likely is not receiving any tax deduction for them. If you were to pay for benefits from your business then your contributions will reduce your income and tax payable.

It is also sensible to have your own plan if your spouse's plan is missing benefits (e.g. crowns or bridges or braces) or has many maximums or only pays 50-80% of the treatment. Basically you establish your plan to replace the components that are missing from your spouse's plan. For example you would cover 20% if your spouse's plan covers 80%, and you would cover 100% of any missing benefits.
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6.  Can I send in a contribution only when benefit receipts are sent in?
You may do this if you choose, but we do not recommend it for the following four reasons:
1)  You will have to calculate the various sales taxes and administration fees to add to the contribution. Also you should provide sufficient funds to satisfy the Monthly Fee deducted from your Accumulation Account at the end of each month.
2)  This process will delay the issuance of the reimbursement cheques as we wait for your deposit to clear through the banking system.
3)  Normally a PHSP is paid monthly, so by paying your contributions monthly there is greater evidence to Revenue Canada (now CCRA) that the purpose of your Self-Directed Benefit PlanTM is to provide a PHSP. This is particularly important if the only eligible employees are also shareholders of the corporation.
4)  Will you know when your employees are sending in their receipts and what they total?
benefit deductionsTop

 
7.  Is interest paid on the balance contained in my Accumulation Account?
Interest is not paid on this balance. But neither are there any cheque fees or other banking fees charged to your Accumulation Account (unless your bank returns one of your contributions unpaid, e.g. NSF).
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8.  How much does the Self-Directed Benefit Plan TM cost?
1) It is reasonable to say that the Plan costs nothing! The tax savings from this plan as well as the Reimbursement Cheques should exceed the amount you are paying to Bene-D-Duct. Otherwise, you should not proceed with it.

2) However Bene-D-Duct does charge for its service to you as outlined in
Administration Fees. These fees are usually between 13-20% of your contributions. The fees are tax deductible.

3) Finally your business must remit sufficient amounts to provide funding for any Reimbursement Cheques, Administration Fees and Applicable Taxes. Often this might mean $100 per month per family, but it really depends upon the health of the eligible family members and how much they will use the benefits. Please read
Contributions for discussion on how to estimate what you should contribute each month.
benefit deductionsTop

 
9.  Can my own Self-Directed Benefit Plan TM have a retroactive effective date?
It is up to you to specify your effective date and Bene-D-Duct will administer it. However we deem an effective date prior to January 1, 2001 as too long ago since previous personal tax returns have been filed. Starting in March/April 2002 this cutoff date will move forward a year to January 1, 2002 since the 2001 tax returns will begin to be submitted.
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