Are the Private Health Services Plan (PHSP) and Health and Welfare Trusts (HWT) tax-free in Canada?

The Private Health Services Plan (PHSP) and Health and Welfare Trusts (HWT) are tax-free vehicles for financing the healthcare costs of business owners and employees. It is a comprehensive benefits plan that provides flexible coverage, and is a management tool that controls cost for business owners and their employees.

It provides the security of a benefit plan without expensive premiums or restrictions. PHSP and HWT are self-funding plans, endorsed by the Canada Revenue Agency. Today, they are popular forms of health spending accounts. Following are five key coverages that PHSP offers:

  • 100% reimbursement
    Employees are reimbursed for 100% of their health, dental and vision expenses (up to the plan maximum), with tax-free dollars.
  • Flexibility of coverage
    PHSP Employee Health Spending Accounts can be used for medically necessary health, dental or vision expenses. Employees use Health Spending Account credits on the services they need, when they need them.
  • Tax savings
    As a business owner, you realize tax savings when you purchase health and dental expenses with before-tax dollars – an immediate saving equal to your personal tax bracket. Health expenses become a tax-deductible business expense, and reimbursements are paid to you personally, tax free.
  • Low administration costs
    Not only are there no premiums to pay, but also our PHSP offers the lowest administration fees in the industry.
  • Low cost control
    Employers decide how many credits / dollars will be applied to employees’ Health Spending Accounts each year. Therefore, the employer knows the maximum amount to be spent on the employee benefit plan in a given year.

PHSP pays health, dental and vision care expenses not reimbursed under other benefits plans. CRA interpretation bulletin IT-339R2

The following eligible expenses can be claimed through a Private Health Services Plan (PHSP):

Acupuncturist (qualified) Optometrist
Chiropodist Orthodontist
Chiropractor Osteopath
Christian Science Practitioner Orthopedist
Dental Hygienist Pediatrician
Dental Mechanic Physician
Dentist Physiotherapist
Dermatologist Plastic Surgeon
Dietician Podiatrist
Gynecologist Practical Nurse
Massage Therapist Psychiatrist
Naturopath Psychoanalyst
Neurologist Psychologist
Nutritionist Radiologist
Obstetrician Registered Nurse
Oculist Speech Therapist
Occupational Therapist Surgeon
Ophthalmologist Therapist
Optician Tutor for Impaired (if prescribed)
Crowns & Bridges Periodontal Gum Treatment
Dental X-Rays Oral Surgery
Dental Repair and Replacement Orthodontics
Examinations Root Canals
Extractions Straightening Teeth
Filling Teeth Veneers
Eye Glasses Eye Exams
Frames & Fittings Laser Eye Surgery
Contact Lenses  
Blood Tests Spinal Fluid Tests
Cardiographs Stool Examination
Diagnostics Fees Urine Analyses
Metabolism Tests X-Ray Examination
Anesthetist Use of Operating Room
Hospital Bills Vaccines
Oxygen Masks, Tent X-Ray Technician
All Prescription Drugs Liver Extract – injectable for pernicious anemia
Birth Control Pills Oxygen
Chinese Medicine (if prescribed) Vitamin B12 – for pernicious anemia
Insulin or Substitutes Viagra (if prescribed)
Over the counter medicines, if prescribed by a qualified medical practitiones and recorded by a licensed pharmacist Tapes or Tablets-for sugar content tests by Diabetics, if prescribed
Alcoholism & Detox Treatments Nursing (by Registered Nurse)
Blood Transfusion Organ Transplants
Bone Marrow Transplants Out of country Medical Care
CAT Scans Pre-Natal, Post Natal Treatments
Diathermy Psychotherapy
Drug Addiction Therapy Radium Therapy
Electric Shock Treatments Speech Pathology or Audiology
Fertility Treatments Sterilizations
Healing Services Ultra-violet Ray Treatments
Hearing Aids Vasectomy
Hydrotherapy Whirlpool Baths
Insulin Treatments & Injections X-Ray Treatments
MRI Scans  
An external breast prosthesis
Any device designed to assist walking where the individual has a mobility impairment
Devices designed to assist a person to use bathtubs, showers, or toilets
Devices designed to enable individuals with a mobility impairment to operate a vehicle
Devices used by individuals suffering from a chronic respiratory ailment or a severe chronic immune system disregulation
Electronic or computerized environmental control systems for individuals with severe and prolonged mobility restrictions
Electronic speech synthesizers for mute individuals
Equipment that enables deaf or mute persons to make and receive telephone calls including visual ringing indicators, acoustic coupler teletyping, which makes telephone communication possible with other persons
Extremity pumps or elastic support hose to reduce lymph edema (swelling)
Heart monitors or pace makers
Hospital beds, if required in home
Inductive coupling osteogenesis stimulator
Infusion pumps for Diabetics, including peripherals
Monitors attached to babies identified as being prone to Sudden Infant Death Syndrome (SIDS)
Optical scanners or similar devices for a blind individual to enable him/her to read print
Orthopedic shoes or boots
Oxygen tent
Power operated guided chair installation for stairways
Power operated guided lifts and transportation equipment designed to allow access to buildings, vehicles, or to allow wheelchair access to a vehicle
Synthetic speech systems, Braille printers, and large print-on-screen devices that enable blind persons to utilize computers
Swelling Syringes
Television closed captioning decoders
Wigs if required as a result of disease, accident, or medical treatment
Ambulance Charges
Any apparatus or material, paid to a doctor, nurse or hospital
Any device to aid the hearing of a deaf person including bone conduction telephone receivers, extra loud audible signals and devices to permit volume adjustment of telephone equipment above normal levels
Artificial eye
Artificial kidney machine, including installation, operating costs
Artificial limb
Blood sugar level measuring devices for Diabetics
Brace for a limb
Catheters, catheter trays, tubing, diapers, disposable briefs required by incontinent persons
Colostomy pads
Fees for Private Health Services Plan (PHSP)
Fees or premiums for non government Health Insurance Plans (such as Blue Cross or Green Shield)
Hearing aid
Hernia Truss
Home maker service – Canadian Red Cross
Home care – Victorian Order of Nurses
Hydraulic wheelchair lifts for a vehicle
Illestomy pads
Incremental cost of gluten free food products for celiac disease
Iron lung
Laryngeal speaking aid
Moving expenses to a more accessible residence for mobility impaired – up to $2000
Reasonable costs for adapting a residence to accommodate a disabled person (e.g. wheelchair ramp, lifts, bath facilities, driveway, new construction)
Rehabilitative therapy, Lip reading and sign language training
Rocking bed for Polio victim
Sign language interpreter
Specially trained animals to assist blind, deaf, or severely impaired persons, including the cost of its care and maintenance
Spinal Brace
Transportation, meals and accommodations. Reasonable expenses for meals, accommodation and travel costs for patient and accompanying attendant may be deductible if:
1. Equivalent medical services are not available locally;
2. The route traveled is reasonably direct;
3. Medical treatment is reasonable and distance traveled is at least 80 kilometers
Transportation costs to a hospital, clinic or doctor’s office to obtain services not otherwise available
Van modifications – adapted to transport a wheelchair to a maximum of $5000 or 20% of the value
Acupuncture treatments if they are not performed by a licensed physician
Antiseptic diaper service
Birth control devices (non prescription)
Health programs offered by resort hotels, health clubs
Illegal operations, treatment or drugs
Maternity clothes
Medical expenses for which you are reimbursed or are entitled to be reimbursed from other plans
Payments to a municipality where the municipality employed a doctor to provide medical services to the residents of the municipality
Provincial Health Care Premiums
Scales for weighing food
Special foods or beverages are not deductible expense for tax purposes. However, if said food or beverages are taken to alleviate or treat an illness and not nutritional, they may be allowed. Such claims must be accompanied by a letter from a medical doctor