
Cost+
Cost Plus is a program that is recognized by the Canada Revenue Agency (CRA) as a Private Health Services Plan (PHSP), offering businesses the ability to deduct eligible health-related expenses allowed under the Income Tax Act.
This initiative not only optimizes financial strategies but also provides additional health coverage for employees. It adds flexibility and customization to a group benefit plan, going beyond traditional benefits.
It empowers employers to offer enhanced coverage for specific medical expenses that may not be fully covered by a standard benefit plan. This approach ensures comprehensive protection and allows employers to address an employee’s unique health needs effectively.


Maximize Deductions with CRA-Approved Expenses
Extending Benefit coverage
Cost Plus is a program recognized by the Canada Revenue Agency (CRA) as a Private Health Services Plan (PHSP), offering businesses the ability to deduct eligible health-related expenses allowed under the Income Tax Act. The eligibility criteria are set by Canada Revenue Agency (CRA) rules for medical expenses, and the listing of what is eligible can be found on the CRA website. These eligible expenses can include items such as orthodontics, prescription medications, vision care, and other healthcare services.
Reimbursement for eligible medical expenses
The Cost+ Claim Process
To initiate a claim, fill out an ABC Insurance Cost Plus claim form and enclose the original receipts. In instances where co-payments or treatments exceed the group plan’s annual limits, please include a claims breakdown from the insurance provider. To ensure a smooth process, accompany your submission with a cheque covering the total claim amount, including the administration fee and applicable taxes.
Our ABC service team will process the claim and then reimburse either the employee or the service provider, depending on the request. Your business may deduct the entire claimed expense as a business expense. It is important to clarify that while we are diligent in our review of Cost Plus claims for their reasonableness, our assessment does not constitute a determination of the medical expense’s eligibility under the Income Tax Act. It remains the responsibility of the employers to verify items included in a Cost Plus claim align with the criteria set forth by the Act for allowable medical expenses.

Claiming with Cost+ vs. Claiming without Cost+
With Cost+
Characteristics
- With the Cost Plus arrangement, The company would issue a cheque for $2,140 towards the cost plus program, this amount includes the actual cost of orthodontics, $2,000, plus a 7% administration fee.
- Subsequently, the Plan would reimburse the employee or provider for the $2,000 claim, ensuring the effective coverage of eligible expenses.
- The total amount submitted $2,140 is tax deductible to the business as an expense and the employee is reimbursed $2,000 for the expense.
Without Cost+
Characteristics
- In order to cover the $2,000 bill, the employee would actually need to receive $3,334 in income from the employer.
- This is due to the employee’s tax liability on the $3,334, which amounts to $1,334 (40% of $3,334).
- In order to ensure that the employee’s after-tax Funds cover the full orthodontic expense, the employer would need to provide the employee with the additional $3,334. This way, after accounting for taxes, the employee would have the necessary $2,000 to settle the orthodontic bill. Total cost is $3,334 (plus any payroll taxes)

CRA Reference Publications
The Canada Revenue Agency (CRA) is the authoritative source of information on Cost Plus plans, and its published positions and rulings offer valuable insights. Notable references include S1-F1-C1, IT529, IT339R2, and IT85R2. Of particular importance is Interpretation Bulletin IT-339R2 for 1988 and subsequent taxation years. This bulletin not only provides guidance on health and dental insurance plans in general but also dedicates a section, paragraph 6, to Cost Plus plans:
‘In a “cost plus” plan, an employer contracts with a trusteed plan or insurance company for the provision of indemnification of employees’ claims on defined risks under the plan. The employer promises to reimburse the cost of such claims plus an administration fee to the plan or insurance company. The employee’s contract of employment requires the employer to reimburse the plan or insurance company for proper claims (filed by the employee) paid, and a contract exists between the employer and the trusteed plan or insurance company in which the latter agrees to indemnify the employee for claims on the defined risks as long as the employment contract is in good standing. Provided that the risks to be indemnified are those described in paragraphs (a) and (b) of the definition of “private health services plan” in subsection 248(1), such a plan qualifies as a private health services plan.