Tax season is here, and it’s the perfect time for employers to shine a light on the benefits of tax-advantaged savings options and stand behind employees in reaching and achieving long-term financial goals. There are powerful tools available amidst the paperwork and calculations that not only offer tax benefits but also support employees’ financial and healthcare needs.
RRSPs and Group RRSPs
Registered Retirement Savings Plans (RRSP) offer tax-deferred growth on contributions until withdrawal. For employees, RRSPs provide an opportunity to save for retirement while reducing taxable income. Contributions made to an RRSP are deductible from taxable income, meaning employees can lower their tax bill in the current year while building a nest egg for the future.
Employers can help promote participation in RRSPs among employees by offering a group RRSP as part of their benefits packages. By facilitating automatic payroll deductions for RRSP contributions, businesses can make it easier for employees to save consistently and take advantage of tax benefits. Employers may also choose to match a portion of employee contributions to incentivize participation and help employees build their retirement savings more quickly.
Health Care Spending Accounts (HCSAs)
Employees can also benefit from Health Care Spending Accounts (HCSAs) to address healthcare expenses not covered by traditional insurance plans. HCSAs offer flexibility and tax efficiency, allowing employees to allocate funds towards a wide range of eligible medical expenses, including prescription drugs, dental care, and vision care.
Unlike traditional health insurance plans, HCSAs provide employees with a predetermined amount of funds that can be used to cover eligible expenses. Contributions to HCSAs are made on a pre-tax basis, meaning they’re dedicated from an employee’s pay before taxes are calculated. This allows employees to lower their taxable income while accessing essential healthcare services.
Group TFSAs
Participation in tax-free savings accounts (TFSAs) is on the rise. They’re typically used for personal savings, but employers can offer group TFSAs to facilitate tax-efficient savings for their employees. Group TFSAs function similarly to individual TFSAs but offer the added benefit of automatic payroll educations, making it easier for employees to regularly contribute.
Contributions to group TFSAs are made with after-tax dollars, but investment income earned within the account grows tax-free. Employees can withdraw funds from their group TFSA at any time without penalty, making it a flexible savings option for both short-term and long-term goals.
By offering TFSAs as part of their benefits packages, businesses can provide employees with a convenient and tax-efficient way to save for various financial goals, such as emergency funds, home purchases, or retirement. Group TFSAs can complement existing retirement savings options like RRSPs, offering employees additional flexibility and choice in their savings strategies.
Tax-Smart Savings Tips
Here are some key items to consider if you’re looking to optimize tax-smart savings strategies for employees:
A Future of Financial Wellness
Prioritizing tax-smart savings strategies such as RRSPs and HCSAs enables small and medium-sized businesses to empower their teams to take control of their financial futures while minimizing tax liabilities.
Offering these benefits as part of a comprehensive group benefits package enables businesses to attract and retain talent while promoting employee financial wellness. Contact us so we can work together to strengthen your offerings.
Suggested Reading
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Additional Resources
RRSPs and Other Registered Plans for Retirement
How employers are maximizing health-care spending and wellness accounts