Coverage Tips

Mandatory Drug Insurance (Benefit Tips ® - © 2013)

If insurance companies have their way, employers will be forced to buy drug insurance for their staff. The Canadian Life and Health Insurance Association (CLHIA) is lobbying for a “National Minimum Formulary” of drug coverage. Their desire is to make it illegal for employers to use annual drug claim maximums or health spending accounts to control their benefit costs.

Since 1997, employers have been forced to provide unlimited drug coverage for their Quebec staff and the CLHIA want to see that regime expanded to the entire country.

Employers have been able to manage their benefit costs for non-Quebec staff by limiting drug claims and replacing insurance with health spending accounts. Notwithstanding what Quebec does, forcing employers to provide unlimited drug coverage is distinctly offensive. If it is truly in the national interest for all Canadians to have unlimited drug coverage then Medicare needs to be expanded.

Source: page 28 of CLHIA report on prescription drug policy.

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Group RRSP (Benefit Tips ® - © 1998)

Retirement savings help aging employees transition out of the workforce. A structured group RRSP is the retirement savings vehicle that is the easiest to establish and maintain. Your only involvement with the government is a letter to Revenue Canada (Taxation) requesting permission to provide tax relief at source. You establish the plan rules, remit payroll deductions as well as any matching contributions, and coordinate the flow of information between employees and the plan administrator. The plan administrator follows the employee's investment instructions, provides tax reporting, prepares accounting statements and provides employee communication material.

Employer matching formulas often fall within the 50%-100% of employee contributions to a maximum of 3%-5% of earnings. Your formula can be tied to service or participation and can vary by class of employee. Employees often make excess voluntary contributions.

With a group RRSP, employer contributions are considered earnings, attract payroll taxes and vest immediately. Employees make all investing decisions and may withdraw funds. The rules of your plan should include restrictions particularly future employer contributions when an employee withdraws funds that the employer has contributed or matched.

Features of a group RRSP include:

  • Immediate tax savings; it’s like getting a tax refund with each paycheque.
  • Monthly contributions result in dollar cost averaging and eliminate market-timing errors.
  • Dozens of funds managed by industry leaders for employees to choose from.
  • Lower investment management fees than their retail counterparts.
  • No transfer fees or deferred sales charges.
  • Investment literature, education and advice.
  • Employee or spousal contributions.
  • Creditor proof in many situations.