Registered Retirement Savings Plan (RRSP) season is upon us. Canadians have until 11:59PM on March 1 to make an RRSP deposit in order to reduce their 2016 taxable income.
As challenging as it may be for employers to educate their workforce about the benefits of saving, budgeting, and putting away funds to maximize their tax efficiency, RRSP season is the perfect time to reinforce key messages that may have been already communicated throughout the year.
RRSP season creates a need-to-know, just-in-time strategy that may be just enough to drive home some key savings tips. RRSP season also creates a window to educate, inform, and motivate employees.
Tips and Reminders
Reminding employees that RRSP season can be a great time to save even if it means taking an RRSP loan. Their return can be used to pay off the RRSP loan quickly. If employees find themselves in a RRSP loan situation, remind them of easy ways to make monthly contributions in order to avoid finding themselves in the same position next year.
Sprinkling RRSP tips throughout the year and creating opportunities for employees to learn ways to pay themselves first through monthly deductions will reduce the last minute RRSP contribution deadline dash. We have several tips and resources to support your financial literacy and RRSP season communication campaigns. Please contact us, we're here to help so that you can focus on what you do best.
If you read Canadian newspapers, you simply can't miss it. The media is aflutter with articles and social media posts about the question said to be under consideration for the upcoming federal budget, expected in early March 2017.
The Federal Government is considering taxing Canadians' employer-paid health and dental benefits.
The Finance Minister committed to a sweeping review of 150 tax credits worth about $100 billion in potential federal review. If health and dental benefits were treated as a taxable benefit, $2.9 billion in tax revenue could be collected.
---In today's news, TheStar.com reports that Prime Minister Trudeau "suggested the tax would not be part of the upcoming budget after he was quizzed on the issue by interim Conservative Leader Rona Ambrose."---
What employee benefits are taxed?
Currently employer paid life insurance and car allowances are considered taxable income. In Quebec, health and dental benefits have been taxable benefits since before 2000.
What's all the hubbub?
A change in this tax policy would effect more than half of the Canadian population.
When the change was introduced in Quebec, approximately 20 percent of employers dropped their group health and dental coverage. If this tax policy change occurs, it is predicted that employers, like those in Quebec, may drop or reduce group health and dental benefits coverage because the tax change would simply be too cost prohibitive.
Who will this affect?
It is reported that 13.5 million workers (22 million if their dependents are factored in) have private health and dental plans and they would be negatively effected by the elimination of this tax credit by an increase of between $500 and $1,200 in their annual tax bill.
Should this policy change be implemented, there is a high probability that the shift would revert from the private payor world to our public system where the costs are already hard to manage.
There is no official statement from the finance ministry to confirm or deny if this tax policy change is under consideration.
Who's up in arms?
Many Canadian healthcare professionals want Canadians to write their MPs to tell them they don't want this tax change. Chiropractors, dieticians, occupational therapists, dentists, physiotherapists and more are supporting a campaign called, "Don't Tax My Health Benefits" with the goal of raising public awareness of the potential for the elimination of this tax credit from the upcoming budget. To learn more about this campaign, check out the website www.donttaxmyhealthbenefits.ca
Have a say.
The "Don't Tax My Health Benefits" campaign encourages Canadians to have their say and sign a petition. If you don't support this potential change, you can write to your local member of parliament directly from the Don't Tax My Health Benefits website.
We're here to help.
We monitor the latest industry trends with a particular focus on the impact to employer-sponsored benefits and pension programs. No matter what position you hold on questions such as these, we're here to provide you with timely and relevant information. We invite you to contact us. We're here to help so that you can focus on what you do best.
Dave Dickinson, B.Comm, CFP, CLU, CHFC
Experienced Benefits Specialist ready to optimize your group benefits and pension plans.