Health and Welfare Trusts (HWT) could save the dentist taxes and boost employee morale.
A “health and welfare trust” is a trust established by an employer (dentist or Professional Corporation (PC)) which pays for certain health, medical and dental care costs of the employees and their families.

HWT have the following advantages:

1. Broader Range of Services
A broader range of benefits may be paid through the trust than are normally available through conventional health services plans; these could include laser eye and cosmetic surgery, medical equipment and special devices. In addition, the trust could pay for the private health services plan that was available to employees prior the trust being established. Therefore, the use of the Health and Welfare Trust in no way restricts benefits that were previously available.

With the advent of professional corporations, dentists can technically become “employees” of their PC’s so that they and their families may be covered by these plans.

2. Tax Savings To The Dentist
All payments to Health and Welfare Trusts are tax deductible to the employer. Without the trust, the dentist would be obliged to pay any elective medical expenses (such as cosmetic surgery) with after tax dollars.

The dentist would have to earn $10,000 to fund a $5,700 procedure. With the trust, a $10,000 payment to the trust by the employer is immediately deductible.

3. Tax Benefits
All the “non-taxable” health and medical benefits available to individuals under the Income Tax are available under a Health and Welfare Trust.
4. Employee’s Tax Considerations
If the employees are paying for their medical/healthcare plan, there contributions may be allocated to the taxable benefits (e.g. term life insurance portion of the plan) of the trust, as it is in the case of health services plans.

If an expense, paid for by a private plan, is not a taxable benefit to the employee, then it is not taxable if paid by a Health and Welfare Trust (and vice versa).

5. Costs?
Consider a cost/benefit analysis before implementing changes – there are certain costs in setting up a HWT.

HWT provides greater flexibility as they facilitate payment of a wider range of medical, health and dental services. HWT could save the dentist taxes and boost employee morale.