Blog

By: Brian P. Adams CLU. CH.F.C

Many employees opt-out of their health and dental benefits because they are listed on their spouse’s benefits plan. After all, why bother with additional group benefits if you’re already covered, right? Wrong. Beneath this assumption lies an oversight that could leave you vulnerable in times of need.

While your partner’s plan may offer a safety net for routine health and dental expenses, it does leave you open for potential financial risks. Here’s why:

• Firstly; relying solely on your spouse’s benefits means neglecting critical protections like Long Term Disability (LTD). Your partner’s employer can’t extend LTD coverage to you, as it’s contingent upon direct employment—a fundamental requirement you don’t fulfill.
• Secondly; the life insurance component of your spouse’s plan might offer a modest cushion, typically ranging from $5,000 to $10,000. While this might suffice for some, it pales in comparison to the comprehensive coverage you could secure through your own group benefits.
• Thirdly; if, for any reason, your spouse loses their coverage, you are going to have a problem. Most plans allow for all members to come onto the plan no questions asked at the time it is set up or when they are first hired. Attempting to secure coverage through your employer’s plan later is either disallowed or exceedingly difficult to qualify for.

Why subject yourself to such uncertainty? The answer is clear: secure your financial safety net by enrolling in your own group benefits plan for life and disability coverage. By doing so, you not only safeguard yourself against unforeseen hardships but also ensure seamless access to health and dental benefits through your employer, should the need arise.

Remember, the foundation of financial security lies in proactive planning. Don’t gamble with your future. Invest in your well-being today, and rest assured that you’ve built a shield against life’s uncertainties.

By: Brian Adams CLU, C.H.F.C.

Every employer wants to fairly compensate their employees well. At the same time, they do not want to give away the farm as the expression goes.

When you pay an employee with salary, there are a lot of additional costs that comes along with that in the form of, such things as, EI, CPP, WSIB, and payroll tax. This means “that raise” ends up costing you more than what you originally intended.

There are also additional costs that are passed on to the employee as well, such as EI, CPP, and income tax. The tax factor becomes greater for the employee, meaning he/she does not get the intended benefit you wanted them to receive. So, imagine what they think of your raise now?

Also, keep in mind that CPP and EI costs are going up for 2023 for both parties. Here is an excerpt from the CTV news release published on Dec 30, 2022:

CTV News – Published Dec. 30, 2022

Higher Payroll Deductions

Canada Pension Plan (CPP) contributions and employment insurance (EI) premiums are increasing in 2023, meaning less take-home pay for Canadian workers.

The employee and employer CPP contribution rates will increase to 5.95 per cent in 2023 from 5.70 per cent in 2022, the Canada Revenue Agency announced in November.  Click HERE to read more on this.

That means the maximum employee contribution to the CPP plan for 2023 will be $3,754.45, up from $3,499.80 in 2022.

In a separate notice, the federal government said that changes to employment insurance rates will result in workers paying a maximum annual EI premium of $1,002.45 in 2023, compared to $952.74 in 2022. Click HERE to read more on this.

Well, there is a way to offer your employee more whereby it is a win/win situation for both parties:

Employee Benefits!!!

When you, as an employer, contribute that same amount of money to either a group or pension plan, the employee gets the full benefit you intended and there are no other costs to you (other than the 8% Ontario sales tax on the premium). And even better news… your whole contribution to the benefit package is a write off for the business!

Book an appointment with us to discuss setting up an employee benefits plan for your business!

Employers are always looking for an edge when it comes to attracting new talent and offering comprehensive employee benefits is one of the best ways to do so. Health Spending Accounts, also referred to as Private Health Services Plans, offer both business owners and their employees a flexible health benefits solution that can work as a replacement or compliment to traditional health plans.

What You Need to Know

1.  How It Works – A Health Spending Account (HSA) is an account with a predetermined dollar amount that employees can use to cover health expenses that are not covered by their traditional health plan.  The amount in the account is predetermined at the beginning of the year by the plan sponsor (employer).  The employees may apply to be reimbursed for eligible medical expenses for both themselves and their dependents.
2. What It Covers – Eligible expenses are determined by the CRA. The general rule is you can claim anything that can be claimed as a medical expense by the Income Tax Act. An HSA is available to cover unpaid balances that are not covered by your health plan, governments plans, or your spouse’s plan. For example, the HSA covers services such as vision care, dental care, and drug expenses that are not otherwise covered (such as fertility drugs).
3. Tax Implications – Businesses may deduct HSA payments made on behalf of employees and their dependents.  Benefits are received tax free by the employees. There are different rules for HSAs for incorporated and unincorporated businesses:

Incorporated

•  The Income Tax Act does not place a limit on the amount of deductions allowed for HSA premiums in a corporation.
• Can be set up with only shareholders as employees
• Payments for medical expenses may only be received by the shareholder as an employee
• Shareholder must be actively engaged in business activities.
• Benefits must be reasonable and be consistent with what would be offered to an arm’s length employee.

Self Employed or Partnership

•  Expenses may be deductible if:
• Individual is actively engaged in business
• In current or preceding tax year, more than 50% of income is from the business or individual’s income is less than $10,000 from other sources.
• Health Spending Account may not be accepted by CRA if the self-employed individual does not have at least one arm’s length employee.

The Bottom Line

Health Spending Accounts are a useful and beneficial tool that can be used by business owners to supplement their employee’s health coverage. Health Spending Accounts can help business owners budget their yearly expense more effectively as the cost of the plan is determined by the business owner, rather than traditional health benefits which have increasing yearly premiums based on claims.  It is important for business owners to pay close attention to the CRA rules surrounding HSAs to ensure that they are eligible for the deductions that are offered to plan sponsors.