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)