OPIP - Tax Considerations
OPIP - Tax Considerations
The OMA Priority Insurance Program (OPIP) ensures that Ontario physicians have access to benefits. OPIP includes the Physicians Health Benefit Program (PHBP), Legal Expense Insurance (LEI), Security Evacuation Coverage (SEC), and optional self-funded coverages (OSF).
Each year you pay an annual contribution for OPIP coverage. However, the Ontario government subsidizes the core costs of the PHBP plan and this subsidization may be considered income to be reported for tax purposes.
Every February you or your professional corporation will receive a premium summary statement outlining the coverage provided under OPIP and the actual plan costs. This statement can be used as a reference when assessing your income tax obligations.
While we advise you to consult with your tax and/or legal advisors to discuss the specifics of your individual circumstances, we would like to provide you with some general information.
$180 (includes 13% HST), the remainder of your annual OPIP payment, is collected by OMA Insurance. OMA Insurance uses these funds to fund Legal Expense insurance, Security Evacuation coverage and to build the OPIP Reserve. Do not include this amount in the calculation of taxable benefits.
Under the supervision of the OMA Board Insurance Committee, the OPIP Reserve was established recognizing that future costs of OPIP would rise, (for many reasons including increased member participation, increased claims, inflation, higher cost of drugs, etc.). The OPIP Reserve funds are then used to mitigate any impact on coverage and to slow increases in cost to our members.
OMA Insurance does not have tax advisors on staff and we are unable to provide tax advice to you about your specific situation. We strongly encourage you to consult with your qualified tax advisor about whether some or all of this expense may qualify as a deduction on your income tax return.
The total cost of your Health Spending Account (HSA) (claims paid, administrative charges and taxes) paid through the government subsidy agreement may be considered income for tax purposes on your income tax return. For the most up-to-date information on whether this is a taxable benefit for you in your personal tax situation, we strongly recommend that you contact your tax advisor or the Canada Revenue Agency.
Your OPIP premium summary statement will confirm the premium (total cost) paid by Ontario Ministry of Health and Long-Term Care through Ontario Physician Services Inc., (MOHLTC/OPSI) on your or your professional corporation's behalf:
- Health Spending Account (HSA) - $350 or $500 credits
The cost of this option equals the dollar value of the claims you make during the year plus administrative charges and applicable taxes. Assuming you claim the full amount available in your HSA during the first year, the total cost will be as follows:
- $350 HSA credits will be $407.50
- $500 HSA credits will be $582.41
The cost of the Health plan depends on your age, coverage selected and that year’s actual claims experience.
- Critical Illness insurance
The cost of the Critical Illness insurance plan depends on your age, gender, smoking status and that year’s actual claims experience.
In some circumstances, you may be able to claim the total premiums paid by both the government and you or your professional corporation as reported in your premium summary as a business expense.
In determining whether the premiums for these plans qualify as a deductible business expense, you and your tax advisor may wish to review the Income Tax Act (Canada), including section 20.01, for guidance. In particular, this section may be helpful to you and your tax advisor in determining whether you meet the criteria for a deduction and the amounts that may be eligible for deduction. The PHBP benefit is only offered to eligible physicians and not to the physician's employees. This may affect the amount of the deduction.
The portion of the premium paid for the Health Spending Account or the Extended Health Care benefit may qualify as a medical expense and may be used to calculate federal and provincial non-refundable tax credits, as outlined in legislation. The premium amount may be eligible for the medical expense tax credit calculations to the extent that it has not been previously deducted under section 20.01 of the Income Tax Act (Canada) as a business expense.
For the most up to date information, please contact your tax advisor and/or visit www.cra-arc.gc.ca.
You or your tax advisor may want to review section 118.2 of the Income Tax Act (Canada), to determine whether the Extended Health Care or Health Spending Account premiums are deductible as personal medical expenses. Please note that Critical Illness insurance premiums do not meet the definition of a medical expense under this section.
We do not provide tax advice and strongly encourage you to consult with a professional advisor to properly determine the tax implications for your specific situation. Our general understanding of the tax rules is as follows:
- Health Spending Account and Extended Health Care: In general, Extended Health Care and Health Spending Account plans offered under a group contract are considered to meet the definition of a private health services plan (PHSP) under the Income Tax Act (Canada). When an employer pays the PHSP premiums for their employees benefit coverage, the employer can deduct the premiums as an eligible expense and there should be no taxable benefit to the employees (outside of Quebec).
- Critical Illness: Based on current tax laws , it is believed that any cash benefit from a Group Critical Illness insurance plan will not presently be taxed when the premiums are paid for by the plan member and the benefit is payable to the plan member. Based on this understanding, Group Critical Illness insurance premiums paid by a corporation are considered a taxable benefit to the employees. Furthermore, any benefit pay-out may be received by the corporation as taxable. For the most up-to-date information, please contact your accounting professional or the Canada Revenue Agency.
In determining whether the premiums for these plans may qualify as a deductible expense by a professional corporation, the professional corporation (and/or its tax advisor) will want to review the Income Tax Act (Canada) for guidance on the question of whether payment of the premiums is a shareholder versus an employee benefit. Generally speaking, benefits conferred on a person in his or her capacity as a shareholder are not tax deductible by the corporation and may be included in the income of the shareholder.
OMA Insurance does not provide individual tax advice and all statements in this document are, to the best of our knowledge, true for many circumstances. We strongly advise you to consult with your tax and/or legal advisors to discuss the specifics of your individual circumstances.