CRA considerations for owner-managed corporations
Most of your incorporated clients are owner-managers, so this is the question that matters: where does CRA stand on shareholder-only plans, and what does a responsibly designed plan do about it?
What CRA has actually said
CRA's most recent direct statement is technical interpretation 2022-0928901C6 (May 2022): a self-insured health spending arrangement covering a corporation's sole employee-shareholder and family “would likely not constitute a plan in the nature of insurance,” because there is little practical risk the owner won't be reimbursed and the corporation can modify or terminate the plan at will. CRA's position on this fact pattern has shifted over the years, but 2022 is the current word, and we think you should know that rather than discover it later.
The same body of guidance sets out a two-part framework for owner-managers. First, the owner must participate as an employee: actively engaged in the business and receiving employment income, not dividends alone; benefits received qua shareholder are taxable. Second, benefits including limits must be reasonable, consistent with what would be offered to an arm's-length employee performing similar services.
For corporations with employees beyond the owner, or owner-managers who clearly satisfy both conditions, the arrangement rests on decades of accepted practice. For a true one-person corporation, a residual question about genuine risk pooling remains. It's a judgment your client should make with you, knowing the design features below and their own appetite for a position CRA has questioned.
How the plan design responds
Every feature below exists to strengthen the insurance character of the plan and document the two conditions above. None of it is boilerplate. It's enforced in the plan agreement and in the portal itself.
Binding annual term
Coverage terms and limits are fixed for the plan year and cannot be amended mid-year; termination takes effect only at year-end on written notice. This answers CRA's objection that an owner-controlled plan is terminable at any time without consequence.
Limits elected in advance, then locked
Each person's annual limit is confirmed at the start of the plan year and locked. Enhanced coverage must be elected in the first 30 days of the year, never partway through, after the expenses are known.
Independent adjudication
Medallion staff review every claim and every enhanced-coverage election, and can decline either. Documented third-party adjudication is evidence the arrangement operates like a plan, not a reimbursement account the owner controls.
Employee-capacity screening
At application we ask how each participant is paid. Dividends-only owners are flagged for a conversation rather than waved through. Participating as an employee, on employment income, is the foundation of the whole arrangement.
Reasonableness, confirmed and re-confirmed
The sponsor represents that each person's limit is reasonable relative to their role and what an arm's-length employer would offer for similar services, at sign-up, at every limit change, and again at each annual renewal.
Prospective coverage only
Plans take effect on approval and claims may only include expenses incurred afterwards. Backdating is the fastest way to lose the insurance character of a plan, so we simply don't do it; the database enforces it.
Not aspirations — enforced, documented, and auditable
Plenty of providers can recite the design features above. The question a professional should ask is whether they're actually operating, and what evidence would exist if CRA looked. We built for that question deliberately.
Enforced by the system, not by promises
The rules above are coded into the portal's database, where they cannot be bent for convenience: a claim dated before the plan's effective date is rejected; a claim beyond the person's locked limit is rejected; limits cannot be edited mid-year; enhanced coverage cannot be added after the 30-day window; and each February 1, new claims pause automatically until the year's declarations are signed. A control that cannot be overridden is stronger evidence of a genuine plan than any policy manual.
A record built for scrutiny
Every agreement and attestation is e-signed against a specific, versioned text and preserved as a PDF with a cryptographic hash, server timestamps, and signing details recorded server-side; a copy is emailed to the signer. Every claim decision, limit change, verification, and payment lands in an append-only audit log, retained for seven years. If CRA ever asks how the plan actually operated, the answer isn't a reconstruction. It's producible, dated, and tamper-evident.
Human adjudication, on the record
Medallion staff review every application, every claim with its receipts, and every enhanced-coverage election, and the judgment is documented, not implied. Approving an above-standard limit requires a reviewer to record that it appears reasonable against the participant's role, industry, and compensation; declines require written reasons; banking is verified by a person against source documents before any money moves. That documented, arm's-length adjudication is exactly what distinguishes a plan from a self-directed reimbursement account.
What we tell your client
The plan agreement includes an explicit tax-risk acknowledgement: CRA, not Medallion, determines eligibility and tax treatment; no outcome is guaranteed; and the sponsor, having assessed suitability with their own advisor, bears the consequences of any reassessment. We'd rather a client read that sentence before signing than after an audit letter.
In practice that advisor is you. We don't position the plan as advice, and our onboarding points owner-managers back to their accountant on exactly the questions above. If a client's situation looks marginal to you, we're happy to talk it through before they apply.
Ready to refer?
Apply online and we'll issue your referral code, usually within a business day or two. Questions first? Ask a person.