Everything Employers Need to Know About Group Benefit Plans

As a business owner, providing a competitive and comprehensive group benefit plan for your employees is crucial. Not only do these plans contribute to the overall well-being and satisfaction of your workforce, but they also play a pivotal role in attracting and retaining top talent.  

If you’re considering a group benefit plan for your company, there are a few things you’ll need to know first. From understanding the various types of plans available to navigate  the complexities of regulatory compliance, this blog will explain everything you need to know to make an informed decision and maximize the value of your investment in employee well-being.

What Are Group Benefit Plans and How Do They Work?  

Employee benefits, also known as group benefits, are offered as part of a company’s total compensation package and are perks or benefits employees receive in addition to their standard salaries or wages. The benefits packages generally include healthcare insurance for employees and their dependents, retirement plans, vacation, and paid time off, but many companies choose to add life insurance and disability insurance. 

Although employers usually pay for group insurance, employees often contribute as well. It is typical for employees to contribute a small percentage of their salary to the company’s monthly premiums. As the business owner, you decide what percentage of the benefits packages your business will cover and what percentage your employees are expected to contribute (if any). As an example, some companies pay 80% of the premium while others may even cover the premium entirely. If you don’t pay the full premium, your employees contribute the rest from their salaries. 

Group benefits are offered to employees regardless of their seniority, position, or qualifications, but the level of benefits employees receive is determined by factors such as company size, your industry, whether your staff works full-time or part-time, and if they get hourly wages or a salary.  

Providing employee insurance benefits might seem like an unnecessary expense, especially if your cash flow is already strained, but it is vital to the long-term survival of your business. At Nour Private Wealth, we understand how important presenting the right employee benefits solution is for your business. That is why we offer what you need through Nour Insurance Services Inc. (NIS), a related and separate company from Nour Private Wealth Inc. We have group benefit plans for small businesses (less than 51 employees), medium to large companies (more than 51 employees), and insurance for Industry Associations and Union Groups. Our service minimizes your administration so you can spend maximum time on your business.

Types of Group Benefits Plans 

There are numerous group benefit plans to choose from, varying in terms of the types of plans available, funding methods, and the benefits offered. Based on our experience, the following are the six most popular types of employee benefit plans:

Fully-insured. A traditional type of insurance sponsored by the employer who pays monthly and yearly premiums to an insurance company, with fixed annual amounts based on the number of employees enrolled in the health plan. The monthly premium amount changes as the number of enrolled members changes. 

Self-funded. Rather than paying an insurance company a predetermined premium amount, the employer takes on the financial costs of employee claims on a per-occurrence basis. Employers create a trust fund, for example, where funds for future claim payments are kept. Third-party administrators are generally hired to process and pay claims on the employer’s behalf. 

Level-funded. A type of self-funded plan where the employer contributes consistent monthly payments to cover claims, stop-loss insurance, and administrative costs. These plans are often ideal for small-to-mid-sized companies as they often cost less. Stop-loss insurance protects employers from higher-than-expected claims. 

Health maintenance organization (HMO). A network of medical insurance providers that limit coverage to medical care provided by doctors and other service providers contracted to the HMO. Due to these contracts, the premiums are lower, but HMO members have additional restrictions. Premiums are paid monthly or annually.

Preferred provider organization (PPO). Contracted healthcare facilities and practitioners, known as preferred providers, offer services to plan members at reduced rates when they visit in-network healthcare professionals. Coverage is available when they need to see an out-of-network service provider. Insurance premiums are generally higher, and there are copays and deductibles. 

A High-deductible health plan with a savings option (HDHP). Insurance coverage offers  lower than usual monthly premiums but a higher deductible than traditional health insurance plans. As members pay a large percentage of their healthcare costs before the service provider pays its portion, HDHPs are often matched with health savings accounts. 

Are Group Benefit Plans Mandatory in Canada?   

Certain sections of employer benefit plans are mandatory in Canada, but companies can provide supplementary benefits for various reasons. The statutory benefits are largely regulated by the Employment Standards Act and include Employment Insurance (EI), Canada Pension Plan (CPP), and workplace insurance coverage that vary by industry. Various leaves are also a mandatory benefit and differ by province. They are governed based on federal or provincial mandates and paid through government-sponsored employment insurance benefits. 

Employers and employees contribute to the CPP, a mandatory social insurance plan funded by contributions from employees, employers, self-employed persons, and revenue earned on Canada Pension Plan investments. It covers the whole country except Quebec, which operates the Quebec Pension Plan. The EI program provides temporary income support to unemployed workers looking for employment or upgrading their skills. Special benefits are also granted to workers taking time off from work for specific life events, including illness, pregnancy, or caring for a critically injured or ill person.     

Mandatory leaves are job-protected, so employers must maintain an employee’s position until it is reasonable for the employee to return to work. Statutory leaves include annual/vacation, compensatory, sick, critical illness, compassionate care, maternity/paternity, and parental leave.  

Health benefits are not mandatory to employee benefit plans, as people can use the public health system. However, there is an extensive list of services not covered by the publicly-funded healthcare system, including prescriptions, dental care, vision care, and various therapies. Non-mandatory healthcare coverage, and individual and employer-funded retirement/pension programs, are non-negotiable supplementary group benefits for most employees. Nour Insurance Services Inc. (NIS) offers various health insurance options to enhance your supplementary benefit plan. 

Pros and Cons of Group Benefits Plans for Your Business  

As a business owner, you must strike a balance between what your business can afford and what your employees need from employee benefits insurance, whether mandatory or supplementary. Most companies have a multigenerational workforce, and to add to the complexity of the matter, each generation requires something different from employee benefits. Younger staff might want wellness programs, while more senior colleagues focus on pensions, health- and dental insurance. Parents with teenagers needing dental braces will value affordable health care, while millennials appreciate assistance with student loans. What are some pros and cons of providing group benefit plans for your business? 

Pros. Employee benefit plans can be tailored to your needs, and there are tax benefits for employers and employees. Offering it as part of a comprehensive package can help your company maintain a competitive edge in the job market, attract quality employees, and retain the key staff you need. Additional health coverage, especially, increases productivity as your employees are not worried about being able to afford the health expenses of loved ones.  

Cons. Managing group benefits plans is time-consuming, placing a burden on your human resources and finance departments. Additionally, there are legal costs, whether due to complicated employee contracts or needing to ensure the benefits service providers are fulfilling their obligations. Small businesses might find the costs prohibitive and often have limited plan options to select from.  

Nour Insurance Services Inc., a related and separate company from Nour Private Wealth Inc., assists business owners in managing company costs and attracting quality employees. We offer affordable group benefits programs for small businesses and design employee benefits plans that give companies of all sizes a competitive advantage in the job market.

Is Group Insurance Tax Deductible  

Taxation is complicated, as every business owner and the chief financial officer knows. The Canada Revenue Agency (CRA) provides employers guide on taxable benefits and allowances, but it is always advisable to consult with your company’s taxation advisors and experts to determine how you can find value in providing employee benefits in Canada. The following benefits, though not a complete list and for informational purposes only, are cost-tax-deductible to employers.

  • Accidental Death & Dismemberment
  • Group Life Insurance
  • Short-Term Disability Insurance
  • Long-Term Disability Insurance
  • Extended Health Care Plan
  • Dental Plan
  • Employee Assistance Plan
  • Registered Pension Plan
  • Deferred Profit-Sharing Plan
  • Canada/Quebec Pension Plan
  • Retirement Compensation Arrangement
  • Workplace Safety and Insurance Board (WSIB) Benefits
  • Employment Insurance
  • Provincial Health Plan

The CRA defines ‘benefit’ as an employee receiving a benefit if the employer pays for or gives something that is personal in nature directly to the employee or to a person, such as an employee’s spouse, child, or sibling. They also require relevant deductions to be reasonable business expenses. 

Does the provision of group insurance have any implications for employees? Employer-paid premiums for critical illness insurance, accident insurance, and group life insurance are taxable benefits, and employees must pay income tax on the amount. Short and long-term disability insurance is not a taxable benefit even when the coverage is paid by the employer. All contributions to an employee’s registered retirement savings plan (RRSP) are taxable, but an employer contribution to a pension plan or deferred profit sharing plan (DPSP) is not a taxable benefit for employees.

Business owners trust the tax planning services offered by wealth management experts at Nour Private Wealth (NPW). We have a vast knowledge of complex Canadian tax laws but routinely utilize tax lawyers to enhance our expertise.

How Much Do Group Benefit Plans Cost Employers?  

Group benefit plans are additional costs to an employee’s gross salary. The average cost of employee benefits in Canada, both statutory and supplementary, are 15% of payroll for a small business and as high as 30% for larger companies. However, the coverage level you select defines how much group benefit plans will cost you as an employer. 

The premium you pay to cover the cost of your preferred plan is based on the level of risk the insurance provider will assume. They look at factors such as the average age and gender of your workforce, your industry or sector, and past claims experience if you previously had a benefit plan. Deciding how you want to carry the cost of the employee benefits plan also impacts your finances. 

You can choose to pay the full premium as an employer, which is a tax-deductible business expense. You can share the costs with your employees, with the most common cost-sharing arrangement being 80/20. Or you can use the coverage by coverage option, where you pay the full premium for some benefits while each employee pays the entire premium for other benefits.    

The cost of mandatory group benefits is clear as the government sets them annually. Employers and employees contribute the same amount to the Canada Pension Plan (CPP) or Quebec Pension Plan until the maximum annual contributions are reached. In 2019, a seven-year gradual enhancement to the CPP was introduced. It is a given that if you are self-employed, you contribute the full amount. The cost of employment insurance (EI) federal and Quebec premium rates and maximums are also easy to determine for payroll purposes.  

Nour Insurance Services Inc. has an extensive insurance offering to add to your group benefit plans. It includes various life insurance and health insurance options, as well as travel insurance. 

Contact us today at Nour Private Wealth if you want to discuss group benefit plans for your business.  

Insurance products and services are offered through Nour Insurance Services Inc., a related and separate company from Nour Private Wealth Inc. Only products and services offered through Nour Private Wealth Inc. are covered by the Canadian Investor Protection Fund.

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