News hit the headlines on September 9, 2013 when Minister of Finance, Jim Flaherty, announced that the Canadian Government will freeze Employment Insurance (EI) rates for the next three years. Without the freeze, EI rates would have risen to $1.93 per $100 of earnings in 2014.
The Minister of Finance indicated that unemployment rates have been falling and the EI account is on track.
Employees currently pay $1.88 per $100 of earnings up to a maximum annual EI premium of $891.12, while employers pay $2.63 per $100 to a maximum $1,247.57, based on a maximum annual insurable earnings of $47,400.
For residents of Quebec who are under the Quebec parental insurance plan, this premium reduction will be $0.35 per $100 of insurable earnings in 2014; Quebec residents will pay $1.53 per $100 of insurable earnings next year.
In 2014, maximum insurable earnings will rise to $48,600. This means that higher-income employees will still pay more in premiums, but not as much as they would have if the premium freeze wasn't in place. Employees earning the maximum insurable amount will pay $913.68 in 2014, an increase of $22.56 over 2013, but $24 less than they would have if the planned increase had gone ahead. For employers, the maximum annual premium will rise $31.58 to $1,279.15, $34 less than anticipated.
Since 60 percent of EI premiums are paid by employers, this is promising news. This EI premium freeze is estimated at saving employers and employees $600 million in 2014 alone. Payroll taxes such as EI are a big cost for smaller business and for businesses of any size, this announcement creates opportunities to divert funds that would have been allocated to EI premiums, elsewhere.
With this news, employers may look at hiring additional staff or investing more in wellness programs or introducing a new Health Care Spending Account. This announcement also creates an opportunity to revisit the group benefits and pension plan designs and consider making changes to optimize the benefits of the premium freeze.
If you have questions about making changes to your plan - whether tweaks or a large plan design overhaul - please contact us. We're here to help so you can focus on what you do best.
As employers continue to look for ways to engage their employees, it seems to be a never ending quest to ensure their plan members have the information needed to make the best possible decisions. Yet all too often, there is an assumption that employees will read the information they are provided and then make sound, rational decisions.
Based on years of experience, client feedback and behavioural economics research, we've learned that employees who make suboptimal decisions negatively affect the quality of their health as well as their financial future. We also know that their decisions in life affect their group benefits plan.
There are many articles on the web and in benefits and pension publications referencing statistics that employees aren't saving enough for retirement. One such example related to data from the 2011 Retirement Confidence Survey, which finds that almost one-third of employees have no savings set aside for retirement, and over 50 percent have saved less than $25,000. What is to be done? What level of accountability is placed on the employer when plan members make poor decisions about their retirement savings?
According to a DCIIA 2011 Plan Sponsor Survey, no matter how much an employer endorses the fact that members should be saving at a rate of 10 percent of salary or higher, most employees fall drastically short of this goal and find themselves saving at a rate of 4 percent of their salary or lower. The result of their decisions finds employees working longer and delaying retirement out of need rather than want. Their choices affect the rest of the employees who may be waiting for a promotion into a job that has been bottlenecked by someone who wishes to retire, but can't afford to stop working. The result has long tail effects on employee engagement and workplace culture.
Similar scenarios and outcomes exist for employee decisions related to health benefits. In a world where we know the negative results caused by adopting poor eating habits, we see the number of people with Type 2 Diabetes continue to rise exponentially. In other instances, employees are inundated with information from their employer about the importance of preventive health care, yet many employees fail to get regular check-ups and free screening tests offered right at their place of work.
With these observations and statistics in mind, it is worth considering the fact that employees - even though well armed with important and helpful information - don't always use rational judgement when making decisions about health and finances. For employers looking to revamp their communication plans, it is helpful to understand the behavioural tendencies of their workforce in terms of the outcomes they've experienced to date.
Here are a few tips to consider when designing communications for employees:
Benefits communications that dive down a path highlighting the negative outcome of employee choices generate emotional responses that deter the reader from accepting the recommendations. In benefits communications, negative framing results in employees who put up walls to the message. They become defensive and their negative behavioural tendencies continue.
With so much being communicated to employees, it helps to ensure your messages are positively framed, easy to read and with key steps for healthy outcomes clearly and simply stated. Using communication vehicles that employees readily access is also key. Depending on the demographics, and other important variables, incorporating social media can be a helpful way to help employees make well informed decisions that positively affect them and the health of their benefits plan.
For more information about this topic, please contact us. We're here to help so that you can focus on what you do best.
As a leading local benefit and pension consultant of Carleton Financial Group (CFG), I have always been passionate about providing superior service and innovative solutions for our clients’ insurance and benefit consulting needs.
In an effort to continue to expand our servicing offering, I am pleased to announce that effective August 26, 2013, Dickinson & Associates o/u CFG, has merged with Gallagher Benefit Services Inc., a subsidiary of Arthur J. Gallagher & Co., which has more than 80 branch offices around the world.
Arthur J. Gallagher & Co. is ranked by Business Insurance Magazine as one of the world’s largest insurance brokerage firms. Arthur J. Gallagher & Co. was originally a family-owned property & casualty agency in Chicago, Arthur J. Gallagher & Co. is ranked by Business Insurance magazine as one of the world's largest insurance brokers and is traded on the New York Stock Exchange under the symbol AJG.
We will continue to operate as a local autonomous office with the same leadership, management, staff and culture that our clients have always associated with us; however, we will now be able to offer even more services. These new offerings will broaden the range of products and services available to our clients, provide access to U.S. and International insurance markets and increase our leverage in negotiating insurance contracts and rates for our clients. In a nutshell, we will be able to provide a national platform while maintaining our local presence.
Although our name will be different, our passion to effectively manage each client’s unique needs will not. Our entire staff will remain in place to serve our clients' needs at the highest level. I am truly excited about this new change and believe it will help us become an even stronger business partner for our clients.
As always, my team and I remain focused on delivering the highest level of client service. If you have any questions about this announcement, please 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.