Employee Considerations
|
Your employees will benefit just as much from the favourable tax situation of the
Self-Directed Benefit Plan
TM
as will you. They will not have to pay any income tax on the reimbursements they receive from the
Plan. If you explain this to them they will be much more inclined to welcome the new plan than think it is of no value.
But remember, your
Self-Directed Benefit Plan
TM
is a
"Cost-Plus"
PHSP
and so your business will fund any reimbursements that your employees receive. Thus you need to consider your overall
strategy on compensation to your employees. Are they already covered by a spouse's plan? Do they have a family?
Do you expect a large amount of benefits to be paid to them?
By adjusting their salary to approximately offset the additional cost of providing them with a benefit plan you will not
experience any increase in total costs. They will benefit by not having to pay income tax on this well structured
compensation plan, which they were paying previously. Or maybe you just want to reward your employees by providing
them with a benefit plan in lieu of a raise! It's up to you.
|
| Employees Closely Related To You |
If your employees are all closely related to you and/or that you know won't try to maximize benefits (say, by buying a new
pair of eyeglasses every year) then you can be more flexible and offer a plan that covers most everything. It is probably still
a good idea to select an overall annual maximum of $2,000 to $8,000 per employee, depending upon your tolerance for risk.
|
| Employees At Arm's Length |
if your
Self-Directed Benefit Plan
TM
is going to cover employees who are not closely related to you and/or that you do not
wish to provide them with several thousand dollars of benefits then you should consider a few things.
|
 |
When establishing your own Plan make sure you
retain the unilateral right to terminate or amend the plan
without the employee being able to maintain constructive dismissal.
Similarly any new employee should also be made aware that
you have the right to terminate the plan. A good way to do this is to announce the plan
in writing to your employees and mention that the plan
is not guaranteed to be in existence forever; rather it can be terminated by you.
The
Benefit Plan Text
that we provide to you for your adoption gives you the right to terminate your plan,
however, it is not a document that fully outlines your contractual relationship with your employees (implied or explicit). If you are worried
about a future situation where an employee might claim constructive dismissal if or when you are terminating the plan
then you should obtain your lawyer's advice.
|
|
Design your Plan
so that the overall annual maximums per employee (including their eligible family members) meet your needs and desires.
You can specify a different overall maximum for
|
| |
| Single Employees |
(i.e. they do not have any eligible family members), |
| Couple Employees |
(i.e. they have exactly one eligible family member), or |
| Family Employees |
(i.e. they have two or more eligible family members). |
|
| |
Or you can specify the same maximum amount for all types of
employees. These overall annual maximum limit your liability in any one year.
|
|
Make sure to design your Plan
with appropriate annual maximums on the various categories of benefits
that suit the desired outcome of your Plan.
For example, you may want to impose a $300 per year per person maximum for basic dental but a
$2,000 per year per person maximum for orthodontic benefits. Perhaps exclude vision benefits entirely, etc.
|
|
Design the employee eligibility to meet your needs.
For example, you may not want to cover student workers during the summer by not covering seasonal employees,
or part-time staff, etc. If you are a proprietor the Income Tax Act will
only allow you deductibility if your plan
covers all full-time employees, and if you own a corporation you must not set up your plan
so it appears as a shareholder benefit.
Click on
Who Qualifies?
for a better description of these considerations. |
Contractual Arrangements
