In December 2024 we released a blog discussing the fact that the Healthcare of Ontario Pension Plan (HOOPP) is now available for incorporated doctors. As part of that release we mentioned some items to be considered prior to moving forward. Two of these items, employee eligibility and cost to the professional corporation of participating in this plan, have been updated and are going to be discussed here. Many of the other items have been addressed as well by HOOPP. These details can be found here
Let’s begin with eligibility as there are a couple of key inclusions and exclusions.
Inclusions:
- All incorporated physicians who operate a Medicine Professional Corporation in Ontario, draw a salary from that MPC and are members of the Ontario Hospital Association (OHA)
- Any employees of the MPC at the time the MPC joins can CHOOSE to join the plan
- All full-time employees hired after the time the MPC joins the plan MUST join
- Part time employees hired after the time the MPC joins HOOPP can CHOOSE to join
Exclusions:
- All family members of the incorporated physician, unless they are also physician owners of the MPC
One of the concerns you will have as an incorporated doctor is the cost of this plan to your MPC. There are two types of costs to these plans, the first is borne by the employees (including you) in the form of employee contributions, the second is borne by your MPC as employer contributions, the good news is that these costs will be deductible to the employee or to your MPC. The HOOPP contribution rates work on what I consider a two-tier structure.
Contributions made up to the Yearly Maximum Pensionable Earnings (YMPE), currently set at $71,300 are subject to an employee contribution rate of 6.9%, earnings in excess of the YMPE are subject to an employee contribution rate of 9.2%. Employers are required to contribute 126% of the employee contributions.
Yearly Maximum Pensionable Earnings (YMPE)
Yearly maximum pensionable earnings is a figure set annually by the Canadian government. It determines the maximum amount of earnings on which contributions to the Canada Pension Plan (CPP).
Now I know I threw a lot of numbers out here, so let’s see a basic example.
If we assume that you are the only employee in your MPC and you draw a salary of $100,000, your contributions to HOOPP would be as follows:
Employee – $7,560
Employer – $9,526
As mentioned earlier, these contributions are tax deductible and can provide tax savings as high as $2,476 to your MPC and $4,046 personally.
Clearly the cost of joining HOOPP is not inconsequential, but you need to look beyond just the cost before making your decision. You should also consider financial factors (payout on retirement) and non-financial factors (timing of retirement, your longevity, employee retention possibilities). This blog post is not going to discuss those topics, but stay tuned for the next blog post that will dig into these details in more depth.
If you have any questions on this article feel free to touch base with a Welch Advisor
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