Why provide an employee benefits plan?

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Business owners are increasingly recognizing the key importance of implementing employee benefit plans in their organization and this is an area that has grown considerably in recent decades. Employee benefits comprise all of the additional things that you offer to your employees on top of their regular salary, which could include pension contributions, health cover / insurance policies, training and education programs etc. Employees are more and more interested in the total benefits package that a potential employer can offer them, rather than just being focused on a binary salary figure and recognizing and understanding this cultural shift in the modern working world is crucial to maintain your ability to recruit and retain the right talent for your business.

Many employees value the benefits that their employer offers, considering them an integral part of their take home pay, none more so than health cover. This benefit can provide financial and emotional security to your employees and their families, without the need for them to complete any health requirements to be on the plan. They are likely to benefit from a preferable level of cover and the plan may even provide them with insurance products such as long-term disability cover, which can be harder to gain outside of a group plan. What’s more, group plans often offer out-of-country emergency healthcare for employees which has the potential to save them money on personal travel insurance products.

Not only do these benefits provide a sense of security to your employees, they can also help them to feel valued as part of your organization, which may in turn foster higher morale and increased motivation within their roles. It is therefore worthwhile for business owners to encourage their teams to recognize the fact that the benefits package that you offer should be considered as an integral part of their take home pay, alongside their actual salary.

Talk to us, we can help.

Estate Planning for Business Owners

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Writing an estate plan is important if you own personal assets but is all the more crucial if you also own your own business. This is due to the additional business complexities that need to be addressed, including tax issues, business succession and how to handle bigger and more complex estates. Seeking professional help from an accountant, lawyer or financial advisor is an effective way of dealing with such complexities. As a starting point, ask yourself these seven key questions and, if you answer “no” to any of them, it may highlight an area that you need to take remedial action towards. 

  • Have you made a contingency plan for what will happen to your business if you are incapacitated or die unexpectedly?

  • Have you and any co-owners of your business made a buy-sell agreement?

  • If so, is the buy-sell agreement funded by life insurance?

  • If you have decided that a family member will inherit your business when you die, have you provided other family members with assets of an equal value?

  • Have you appointed a successor to your business?

  • Are you making the most of the lifetime capital gains exemption ($835,714 in 2017) on your shares of the business, if you are a qualified small business?

  • Are you taking care to minimize any possible tax liability that may be payable by your estate in the event of your death?

Estate freezes 

The process of freezing the value of your business at a particular date is an increasingly common way of protecting your estate from a large capital gains tax bill if your business increases in value. To achieve this, usually the shares in the business that have the highest growth potential are redistributed to others, often your children, meaning that they will be liable for the tax on any increase in their value in the future. In exchange, you will receive new shares allowing you to maintain control of the business with a key difference – the value of the shares is frozen so that your tax liability is lower and that of your estate when you die will also be reduced. 

2019 Federal Budget

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The 2019 budget is titled “Investing in the Middle Class. Here are the highlights from the 2019 Federal Budget.

We’ve put together the key measures for:

  • Individuals and Families
  • Business Owners and Executives
  • Retirement and Retirees
  • Farmers and Fishers

Read more

Small business owners get relief from EI premium rates

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The reduction will partly offset increases to CPP premiums next year

Clients who own small businesses and who are worried about upcoming Canada Pension Plan increases got some relief Thursday. The Canada Employment Insurance Commission announced a decrease in employment insurance premiums for 2019.

The 2019 rate will be $1.62 per $100 of insurable earnings, a decrease of four cents from the 2018 rate. For employers, who pay 1.4 times the employee rate, the $2.27 rate per $100 of insurable earnings amounts to an effective decrease of 5.6 cents, the commission said.

The commission sets the premium rate based on a seven-year break-even rate for the EI operating account. It said lower unemployment projections led to the reduction.

In a statement, Finance Minister Bill Morneau and Social Development Minister Jean-Yves Duclos said the rate is the lowest since 1980 and almost 14% lower than in 2015.

The Canadian Federation of Independent Business, which has been lobbying the federal government to delay CPP increases set to start in 2019, applauded the reduced EI premiums.

The new employer rate is five cents lower than last year, the organization said in a statement, and will offset some of the cost increases for employers from the CPP hike.

Other information on the EI premium rate:

  • The rate for residents of Quebec covered under the Quebec Parental Insurance Plan will be $1.25 for employees and $1.75 for employers, a five-cent reduction.
  • The maximum insurable earnings for 2019 will increase to $53,100 from $51,700 in 2018.
  • For self-employed Canadians who have opted in to the EI program, the annual earnings required in 2018 will increase to $7,121 for claims filed in 2019.
  • The maximum annual EI contribution for a worker will increase by $2.00 to $860.22 (up $2.80 for employers to $1,204.31 per employee). In Quebec, the maximum annual contribution for a worker will decrease by $8.35 to $663.75 (down $11.69 for employers to $929.25 per employee).

Read a summary of the commission’s actuarial report here.

The Difference between Segregated Funds and Mutual Funds

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Segregated Funds and Mutual Funds often have many of the same benefits such as:

 

  • Both are managed by investment professionals.
  • You can generally redeem your investments and get your current market value at any time.
  • You can use them in your RRSP, RRIF, RESP, RDSP, TFSA or non-registered account.

 

So what’s the difference? Who offers these products?

 

  • Segregated Funds: Life Insurance Companies
  • Mutual Funds: Investment Management Firms

 

Why is this important?

 

  • Since Segregated funds are offered by life insurance companies, they are individual insurance contracts. Which means….
  • Maturity Guarantees
  • Death Benefit Guarantees
  • Ability to Bypass Probate
  • Potential Creditor Protection
  • Resets
  • Mutual Funds do not have these features.

 

What are these features?

 

Maturity and Death Benefit Guarantees mean the insurance company must guarantee at least 75% of the premium paid into the contract for at least 10 years upon maturity or your death.

Resets means you have the ability to reset the maturity and death benefit guarantee at a higher market value of the investment.

 

Bypass Probate: since you name a beneficiary to receive the proceeds on your death, the proceeds are paid directly to your beneficiary which means it bypasses your estate and can avoid probate fees.

Potential Creditor Protection is available when you name a beneficiary within the family class, there are certain restrictions associated with this.

 

What are the fees?

 

  • Segregated Funds: Typically higher fees (MERS)
  • Mutual Funds: Typically lower fees

 

I can help you decide what makes sense for your financial situation.

2018 Federal Budget Highlights for Business

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The government’s 2018 federal budget focuses on a number of tax tightening measures for business owners. It introduces a new regime for holding passive investments inside a Canadian Controlled Private Corporation (CCPC). (Previously proposed in July 2017.)

Here are the highlights:

Small Business Tax Rate Reduction Confirmed

Lower small business tax rate from 10% (from 10.5%), effective January 1, 2018 and to 9% effective January 1, 2019.

Limiting Access to the Small Business Tax Rate

A key objective of the budget is to decrease the small business limit for CCPCs with a set threshold of income generated from passive investments. This will apply to CCPCs with between $50,000 and $150,000 of investment income. It reduces the small business deduction by $5 for each $1 of investment income which falls over the threshold of $50,000. This new ­regulation will go hand in hand with the current business limit reduction for taxable capital.

Limiting access to refundable taxes

Another important feature of the budget is to reduce the tax advantages that CCPCs can gain to access refundable taxes on the distribution of dividends. Currently, a corporation can receive a refundable dividend tax on hand (known as a RDTOH) when they pay a particular dividend, whereas the new proposals aim to permit such a refund only where a private corporation pays non-eligible dividends, though exceptions apply regarding RDTOH deriving from eligible portfolio dividends.

The new RDTOH account referred to “eligible RDTOH” will be tracked under Part IV of the Income Tax Act while the current RDTOH account will be redefined as “non-eligible RDTOH” and will be tracked under Part I of the Income Tax Act. This means when a corporation pays non-eligible dividends, it’s required to obtain a refund from its non-eligible RDTOH account before it obtains a refund from its eligible RDTOH account.

Health and welfare trusts

The budget states that it will end the Health and Welfare Trust tax regime and transition it to Employee Life and Health Trusts. The current tax position of Health and Welfare Trusts are linked to the administrative rules as stated by the CRA, but the income Tax Act includes specific rules relating to the Employee Life and Heath Trusts which are similar. The budget will simplify this arrangement to have one set of rules across both arrangements.