Top 10 Financial Concepts for Business Owners: #7 Take Care Of Employees & Their Families

Giving employees and their families security and peace of mind through group benefits is a great way to promote goodwill and employee loyalty. There are various tax efficient savings vehicles available for employees. These include a Group RRSP, Deferred Profit Sharing Plan (an employer-sponsored retirement savings plan registered with the Canada Revenue Agency (CRA) that allows companies to share a portion of their profits with employees), Employee Profit Sharing Plan (a compensation arrangement that allows an employer to share a portion of the company's profits with employees) as well as a Defined Benefit or Defined Contribution Pension Plan.

Group RRSPs are essentially a group of individual RRSPs that each employee sets up. The company and/or employee can make regular contributions to the plan and if an employee leaves the company, it is quick and easy for them to transfer that RRSP to another RRSP provider they may have already had.

A pension plan, whether Defined Benefit or Defined Contribution, is a more formal type of corporate retirement savings plan. Due to the increased administrative costs, they are usually used by larger companies and governments.

Health and dental insurance plans are one option for providing group health benefits to employees. There are various insurance providers, each with different coverage levels and costs.

Another plan that is available to employees is called a Private Health Services Plan. This is a type of health care plan that, rather than health insurance, allocates a dollar amount that an owner or employee can spend each year on health expenses. The health care expenses become classed a as tax free medical plan reimbursement and not a taxable benefit to the employee. However, the PHSP expenses incurred do qualify as a tax deduction for the business. The medical expenses that are eligible under the plan are the same as the expenses detailed in the Medical Expense Tax Credit. Also, a PHSP can be utilized in conjunction with a traditional health insurance plan and then insurance premiums claimed as a reimbursable expense through the PHSP.

As always, we encourage you to reach out to your trusted tax planning professional for information and advice tailored to you and your business.

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