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How is this Legal? Due Diligence Information for Accountants and Professional Advisors
The legal framework for the Health Spending Account is provided by the Income Tax Act.
In 1989 the Canada Revenue Agency released interpretation bulletin IT-339R2, which discusses the concept of a "Private Health Services Plan" (or PHSP).
This bulletin clarifies constraints for covering the cost of medical care under a PHSP and discusses the tax status of contributions made via such a plan by an employer on behalf of an employee. It clarifies the legal tax framework for providing Health Spending Accounts.
PreTax Health operates in a strategic partnership with National HealthClaim (NHC). NHC is the administrator of the underlying HSA product infrastructure and provides adjudication services. NHC also administers various other benefit types. Its product infrastructure administers benefits for thousands of employees, and it adjudicates thousands of health spending account claims each year.
NHC enjoys an exemplary compliance record, which we believe to be unmatched in the industry. An international accounting firm has reviewed NHC's operational guidelines and their Health Spending Account products for full compliance with the Income Tax Act.
(Accountants and professional advisers can receive access to a copy of this document. Please email us at info@pretaxhealth.com, and we would be happy to share it with you. Please include your name, phone number and the name of your company).
Some excerpts from the review document:
“It is our opinion that the National HealthClaim, Health Spending Account qualifies as a PHSP (Private Health Service Plan)”
“In a Health Spending Account plan such as the one offered by National HealthClaim Corp., CRA has indicated that there are three contractual obligations that must exist … in order for the plan to qualify as a PHSP…..”
“It has been determined by the courts that to qualify as a plan or contract of insurance five basic elements of insurance must exist. Interpretation Bulletin IT-339R2, “Meaning of Private Health Services Plan” (“IT-339R2”) identifies those five elements..…”
In fact, this review has lead us to conclude that many other providers of Health Spending Accounts (or similar products) are *not* in fact properly compliant with the Income Tax Act. One example of this is the numerous providers who also offer Health Spending Accounts to sole proprietorships: the aforementioned review found quite unequivocally that this violates IT-339R2's requirement that a PHSP must be a proper contract of indemnity/insurance. This is why PreTax Health is only available to incorporated Canadian companies.
If you have further questions, or require more information please contact us at info@pretaxhealth.com
