Don’t Tax My Health Benefits!


taxRecent media reports suggest the Government of Canada is considering a new federal tax on the employer-paid portion of your health and dental plan coverage.

In 1993, a similar provincial income tax on the employer-paid portion of benefit plans was introduced in Quebec. It resulted in almost 20 per cent of Quebec employers (including up to 50 per cent of small business employers) terminating their group benefit plans. Under the proposed legislation, employee coverage would be considered a taxable benefit (additional income).  So that $500 visit to the dentist, would now have to be declared, not as an expense but as income on your T4.

So What?

Taxing the employer-paid portion of benefit plans may have the following implications:

  • As an employee, you would have to pay tax on the amount of the employer-paid portion of health and dental coverage, as it would be a taxable benefit. While it’s not clear how much such a tax could cost, the additional amount subject to tax might be hundreds or even thousands of dollars.
  • Termination of employer-paid health and dental benefit plans could lead to serious public health issues. According to a recent IPSOS poll, without coverage through group benefit plan, 84% of Canadians would end up delaying or forgoing treatment or medication if they didn’t have coverage. This will ultimately drive up treatment wait times and public health costs.mental-health
  • Among many other health outcomes, Canadians’ mental health will suffer as their covered access to needed psychological and other mental health supports will be reduced.

Take action

You can help protect the health care coverage that over 22 million Canadians rely on. Visit www.donttaxmyhealthbenefits.ca to tell your Member of Parliament and the Minister of Finance that you oppose a tax on your health and dental coverage. To ensure your voice is heard, use the hashtag #donttaxmyhealthbenefits on Facebook, Twitter.

 

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Self-employment – With Benefits


Health and dental insurance helps to protect your business’s most important asset: you.

Canadians are increasingly turning to self-employment as their means of earning a living. Over the past 25 years, the number of self-employment people in this country has risen from 1.8 million to 2.7 million. In March 2015, more than 15 percent of working Canadians worked for themselves. (These numbers according to Statistics Canada June 2015 historical summary of self-employment data)

Being your own boss comes with many benefits, including the freedom to manage your own schedule and make final business decisions. Self-employment doesn’t, however, come with “benefits” – such as paid vacation time, a retirement plan and a health and dental plan.

I have personally been self-employed my entire adult life. I know better than most that it can be a trade-off. Self-employed Canadians have to save up for their vacations, invest towards their retirement and hope with fingers crossed that their out-of-pocket health and dental costs stay manageable. But when unexpected things happen, like a long term illness with expensive maintenance drugs it can put a real crimp in your financial plans.

Such an Illness, and the more than $300 per month prescription drugs that came with it were partially responsible for my bankruptcy back in 2005.  However, solutions are available to help people in this situation get the health benefits they need.

Plan for routine costs and unexpected expenses

For some self-employed people, purchasing individual health and dental insurance may be a good way to cover routine costs that fall outside provincial health plans. Every year, many Canadians spend hundreds of dollars on dental visits, eye care, prescriptions and services such as massage therapy and physiotherapy. According to a 2013 Statistics Canada report, the average Canadian household spent about $1,662 annually on direct health care costs.

Perhaps even more importantly, the right package can help provide protection from the financial impact of unexpected expenses. You may need dental surgery. A child may need braces. A family member may require ambulance, home care or nursing services.

Having health and dental benefits in place that meet your needs can go a long way to help alleviate the stress of unexpected expenses. When choosing coverage, look for:

  • Affordable rates that fit comfortably into your monthly budget
  • A customizable plan that lets you choose different options
  • Easy claims processing so you don’t have to deal with more paperwork

Give us a call

Being self-employed doesn’t mean you have to do without health and dental benefits, like I did for nearly 20 years.  Talk to us about what’s available, what it covers and what it costs. You may be pleasantly surprised by the price of a package that provides effective protection for yourself and your family. Not the mention the extra loyalty you may be able to engender with your key employees by extending some benefits to them as well.

Individual health and dental insurance is a safety net – reassuring every day, and important in a crisis. It’s a valuable “perk” to add to the others more commonly associated with the freedom of self-employment. And it just might prove to be the difference between continued self-employment and bankruptcy.

Contact us for more information on how to incorporate a health plan into your business.

Regulate Risk


Six Steps to Financial Freedom, Step Two

Quick, what’s your biggest asset?

Did you say your house, your car, or if you’re lucky your investment portfolio?

Wrong, wrong and wrong again!

The fact is your biggest asset is you.

Step Two in my Six Steps to Financial Freedom is to Regulate Risk. Since your biggest asset is actually yourself and your ability to earn and income that means your biggest risk is the risk of losing that ability. Once you have taken control of your debts and before you start investing you need to make sure you protect yourself and your family from some the unthinkable (and inevitable) events.

Here are some sobering statistics.

–          The average working individual has a 1 in 3 chance of being off work due to illness or injury for more than 90 days at least once between the ages of 25 and 65.

–          The average length of disability is 2.9 years.

–          1 in 2 and 1 in 3 women will develop heart disease resulting in a prolonged absence from work.

–          1 in 2.3 men and 1 in 2.7 women will develop cancer, resulting in a prolonged absence from work.

–          80% of heart attack patients make a full recovery.

–          100% of deaths are permanent.

Regardless of what the personal opinion and compassionate position of your banker might be, the bills will keep coming. Nothing can derail your retirement plan or increase your debt faster than an unexpected illness or the premature death of a wage earner.

As a result before you start investing I strongly recommend you carry 4 types of insurance. Depending on your employment situation not all of these products are necessary for everyone and budget is always a consideration but these are the basics.

1 – Health Insurance.

healthplan

The good news is that most employers offer some form of group health plan to their employees to cover prescription drugs, dental and other incidental health care related costs. Many health insurance plans also include a small amount of Life and Disability Insurance. In most cases however the Life and Disability portion is very small and severely restricted, read the fine print and ask a licensed insurance specialist to help you interpret what it all means. There is nothing worse than surprises when it comes time to make a claim. And of course, once you leave your employer you no longer have coverage. If you work for an employer who does not offer a group plan, or you are self-employed look into getting some personal coverage, it may seem expensive at first but believe me, no one who makes a big claim for cancer treatment or restorative dental work ever says they paid too much for their insurance.

2 – Life Insurance.

coffin

Despite what you might think dying is not a get out of debt free card. Especially for the people you leave behind. The number 2 cause of bankruptcy in North America is the early death of a wage earner. If you carry debt – get life insurance! Even if you don’t carry debt or your spouse thinks they can handle it without your income you should still get at least enough insurance to cover the cost of a funeral. The average cost of a funeral in Canada is $12,000 add to that final expenses related to a prolonged illness and possible legal fees incurred in settling your affairs and the cost could easily exceed $15,000 or $20,000. It just makes good sense to make sure the last thing your loved ones remember about you it’s how much your funeral cost.

3 – Disability Insurance.

injured

Back to point one, most employers offer some form of Disability Insurance within their group health plans but read the fine print. Most group disability coverage only starts paying after you’ve already been off work for several months and stops paying after about two years. From the stats above we know that the average length of disability is closer to three years and that’s if you’re lucky enough to even qualify under the definition of disability in your plan. Many policies define disability so narrowly that even though you can’t do your job, if you can do any job at all for any amount of pay, you don’t qualify. Think about that for a minute.

A personal disability insurance plan tailored to your income and special skills, even in conjunction with a group plan, might be the difference between making your mortgage payment or being forced to sell your house and move to a cheap apartment.

Any guesses as to what’s the number one cause of bankruptcy?

4 – Critical Illness Insurance.

sick

Many critical illnesses, cancer, heart attacks etc, have a fairly quick recovery time and as you can see by the stats above, medical science has given us a pretty good chance of surviving. You could have a heart attack and be back to work, at least part-time in less than a month. You could be taking cancer treatments in the morning and going to work in the afternoon. If that’s the case you might not be off work long enough or have your hours reduced enough to qualify for disability insurance. But the economic cost could still be significant.

Disability Insurance only replaces your income it does not cover the cost of one-time expenses like home renovations to accommodate a wheel chair or expenses associated with a long hospital stay. Things like extra commute costs or the loss of income from a spouse who takes time off to be with you for example are not generally considered in a disability insurance claim. That’s where a critical illness policy becomes valuable it provides a one-time lump sum payment at the time of diagnosis to help cover initial expenses associated with the condition.

As you can see there are quite a few areas of risk associated with your ability to earn an income that need to be addressed early in your financial plan.  When bad things happen, it doesn’t take long to wipe out a retirement nest egg if you aren’t prepared with a proper amount of insurance. The exact structure of an insurance plan is different for everyone based on your budget and how exposed you are but the bottom line is this; if you have any debt, a job or are currently breathing, you are exposed to risk that a good health, disability and life insurance plan can mitigate and you should do that before you invest a dime.

Next week we’ll look at step three, Rule Retirement.

If you have any questions or would like more information on how to Regulate Risk in your life write to themeekonomicsproject@gmail.com

Myth Busters


One of my favourite guilty pleasures is to watch the TV show “Myth Busters” on The Discovery Channel.

mythbusters

It’s a great way to kill half an hour when there is nothing else on and learn how urban legends and Hollywood stunts either do or don’t work in the real world.  In particular I remember one episode where the hosts deconstructed a scene from Raiders of the Lost Ark.  Indian Jones tosses a rod through the spokes on a motorcycle’s front wheel causing the bike to flip forward and throw the rider twenty feet into the air. With a really big explosion to boot!

Spoiler Alert! – physics doesn’t work that way, the force required to change the trajectory of someone on a speeding motorcycle from forward to vertical is far greater than would be provided by a simple iron rod, not to mention the fact that nothing about the scenario would suggest any kind of explosion.  It’s still a pretty cool effect though, watch the clip here…

We are surrounded by these kinds of myths every day.  Most of them are just harmless entertainment but believing certain things as they are portrayed in the media and perpetrated through urban legend can be harmful.  Not the least of which are some of the myths we’ve been taught to believe about retirement planning.

Earlier this month I found this following article in the Wall Street Journal.  “Five Retirement Myths That Could Cost You.”

Now granted this article takes things from a US perspective and I am the last person who would suggest Canadians take seriously a lot of advice they get from south of the boarder, I’ve written on the pitfalls of that strategy before, but a lot the principles, if not the actual practices still apply.

Points 4 and 5 are especially worrisome to me as a Financial Advisor.  I can’t tell you the number of times I’ve counselled people in their early retirement years who are shocked to learn that their expenses did not drop as much as they thought they might, in a lot of cases expenses actually rise in early retirement when, as the article suggests, people have nothing but time on their hands and are still in relatively good health.  What else is there to do but spend money on things you didn’t have time to do before?  Golfing everyday isn’t free after all!

And what about your health care?  While most prescription drugs are covered by the Ontario Health Plan for Seniors many are not, and the benefit doesn’t start until you turn 65.  What if you decide to retire early?  Neither does the plan cover other things usually taken care of by company health plans like dentists and optometrists.

Most myths and urban legends like the ones portrayed on Myth Busters are just fun facts to ponder but when it comes to your retirement why take the risk?  Get the facts first, what you don’t know can hurt you.  For more information and a free personal retirement consultation write to: themeekonomicsproject@gmail.com

It’s not going to happen to me.


Let’s do a thought experiment.

Think about all the people who are close to you in your daily life, family friends, co-workers etc.  For the average person you will have regular interaction, once or more per week, with say 50 people.  If that seems high you’re probably an introvert like me and you just don’t notice all the people around you, that’s okay, if it makes you feel better can you cut that number in half to 25.

Either way, it’s safe to say you come into contact with at least 25 people on a regular basis, seeing them over and over again, at least once a week.

Now – throughout your life how many of those people have gotten sick or seriously injured so that they had to take time off work?

sick

I’m not talking about coming down with a nasty flu for a week or two I’m talking about prolonged debilitating illness or rehabbing from an injury that kept them away from their regular occupation for a month or more.  Personally, without spending too much time thinking about it I can name at least 9 people that have been a regular part of my life in one way or another who ended up off work in this way, two of whom eventually died before they could return to their regular lives.  Oh and did I mention they were all under the age of 65, in the middle of their prime earning years?

I don’t know about you but I think seeing 9 different people affected by serious illness or injury during my lifetime is a statistically significant number but if that doesn’t convince you think about this;

According to Statistics Canada:

–          1 in 3 Canadians will contract cancer in their lifetime.

–          Cancer was the official cause of death for over 76,000 people in 2010.

–          1 in 4 will contract some form of heart disease

–          50,000 people have a stroke each year

–          30% of all Parkinson’s patients are under 50

–          There are over 900 spinal cord injuries every year

–          Everyday 8 people learn that their kidneys have failed

Every one of these events will cause serious financial strain to those who experience them.  It’s a fact.  The public health system does not cover for lost income and most corporate disability plans (if you’re lucky enough to be one of just 45% of Canadians who have one) don’t pay out until you’ve been off work for 6 months or more, with no back pay, and then only pay for a maximum of 2 years.  Of those 9 people I mentioned above, other than the two who died, only one made a successful claim on their health plan.

Now think about this:

–          22% of people who lose income as a result of time off work resort to credit cards to finance the shortfall.

–          22% tap into personal savings, including retirement funds

–          12% borrow from friends or family

–          5% remortgage or sell their homes

For more detailed statistics check out the results of this national poll published this past May.

Nearly Half of All Canadians Facing Major Illness Struggle Financially.

The numbers are sobering.  Do you still think it’s not going to happen to you?

Check out the Meekonomist Manifesto above and click on the link about Being Prepared for Emergencies for more information on Disability and Critical Illness Insurance or write to themeekonomicsproject@gmail.com

Health Insurance – Better Than Cash


As many of you know, before I started working in the Financial Services industry I spent 19 years as a marketing rep in the Music Industry, the last 12 at the same company.  During that time I never had a health plan.

When I started I was in my late 20s and the lack of access to things like routine dental care and the odd prescription really wasn’t that big of a deal to me.  Health plans weren’t for young health people like me; at least that’s what I thought.  That is until my wife was diagnosed with a chronic condition, requiring approximately $200 per month in prescription drugs.  The resulting financial strain on our new marriage was at times unbearable.  Not to mention the fact that neither of us saw an optometrist or dentist for over ten years.

That’s why, when I became a Financial Advisor I started talking to small business owners about the benefits of providing health insurance for their employees.

healthplan

A recent survey from Manulife Financial shows that while most companies believe they are responsible for the health and wellbeing of their employees fewer than 45% of them actually provide any form of health plan.  Cost is a huge factor but most small business owners just don’t know how to optimise the plan and how with the help of a good accountant they can balance the cost against some very generous tax advantages, for both the employer and the employee.  Not to mention the cost of retraining when employees leave for greener pastures at companies who get it.

For many employees, a well designed benefits plan can be better than cash.  For more information on how best to structure a health plan for your employees feel free to write to me at themeekonomicsproject@gmail.com and click the link here to read more on the Manulife Financial Small Business Research Report.