So you’re a business owner. You’ve worked hard to grow your business. You’ve got a loyal staff and want to make sure your employees have a great benefits plan. Does that mean that you should be on the same plan as your employees? It would help if you looked at business owner benefit plans.
The nice part of benefits in Canada, they are a tax-free benefit to employees and can be written off entirely as a business expense for a company.
But that means you should be under the same plan as your employees?
Many employee plans will have co-pays, deductibles or have the employee contribute to some financial portion of the plan. This is important because it makes the employee have an ownership stake in the plan’s overall cost and sustainability.
Also, most plans have limits or don’t offer reimbursement for all CRA-approved benefits. For most companies, this needs to be the practice. Otherwise, the cost of the plan would not be sustainable. Benefits like orthodontics, limitless vision care and paramedical expenses need to be contained for the overall welfare of the plan.
Owners are not employees. They take risks, have the overhead, so why not give them one of the few opportunities to expense all personal healthcare costs through his/her company.
There still needs to be an element of insurance for some health-related expenses but by putting all other expenses through a Health Spending Account (HSA) makes sense.
Why pay for some health and dental expenses with after-tax dollars when you can legitimately put the expenses through your business.
Provided that you’re “fair and reasonable” and only submit CRA approved expenses, why not leverage this utility.
The other owner-related benefit component that is often misunderstood or poorly advised upon is on Long Term Disability (LTD) and owner’s participation in the group LTD insurance.
In this situation, group insurance is great employees but not always great for employers. That’s why you need to look at business owner benefit plans.
Often, owners will take a modest salary and depending upon the profitability of the company in any given year, he/she may choose to issue a dividend payment to themselves.
This is fine and common practice amongst business owners but doesn’t always work for Group LTD plans. Owners may be paying for a benefit that if they need to utilize, may never payout.
We encourage business owners to do not participate in the Group LTD plan and take out a Personal LTD plan that is better suited to his/her needs.
The beauty of Personal LTD plans, it’s comprehensive in tending to owner’s needs in the event of a claim but has the opportunity to get the premium back if it’s never used.
It’s important to consider everything when setting up a benefits plan for employees but also the consideration when addressing business owner benefit plans.
The benefits world can be complex and confusing. If you’d like to understand more, please contact The Finish Line Group and see why “ Solutions begin from a place of understanding”.
Chris Coulter is the Founder and President of The Finish Line Group. He works with business owners to leverage their businesses to increase their wealth, reduce corporate and personal taxes, create viable succession strategies, enable employee retention strategies and allow them to exit their businesses on their terms.
Chris’ passion for what he does evolve from the mistakes he made in his first business; by not diversifying his risk and not utilizing a lot of the opportunities within his business to create significant wealth. Chris found out the difficult way and now educates business owners on how to avoid many of his former oversights and ultimately control where their finish line ends.