More Money. Better Benefits.

As fall approaches the fiscal year of many companies is coming to an end. For some of us, this means that we have to elect our new employee benefits.  If you are renewing your employer benefits, or if you are making original choices with a new employer, here is some helpful information regarding Employer Benefit Options.

Employer Benefits such as insurance, health and dental plans, savings plans, and pension plans are all important aspects of our Employer Benefit Options which, along with our annual salary, make up our Total Rewards Package.

Popular types of insurance benefits are critical illness, accidental death and dismemberment, travel insurance, as well as life insurance. Basic life insurance, which is generally one times the value of our annual salary, is often paid by our employer.  We may have the option to purchase additional life insurance at our own cost; it is better to buy life insurance through our employer because the annual premiums are discounted.

Travel Accident Insurance, Accidental Death or Dismemberment Insurance, and Critical Illness Insurance all offer a one-time lump sum payout in addition to any regular life insurance coverage.  Life insurance is not included in the value of a person’s estate because the benefits are paid (tax free) directly to the beneficiaries.

Health Insurance Plans offer Medical and Dental benefits to employees, their spouse, and their dependents. Usually we have a choice of 3 to 4 options which all include different levels of coverage such as 50%, 70%, or 90%.  Each option has a specific cost which is deducted from the amount of credits (benefit money) offered by our employer. If our plan options cost more than our credits the difference is deducted from our pay check throughout the year.  This is great because we are not required to make a lump sum payment.  The coverage that I have at the bank for Nick and I costs less than my available credits.  Therefore, the balance is deposited into my Health Savings Account.

Savings Plans are a great way to promote “Forced Savings”. Forced Savings means that we never see the money and therefore we never miss it.  The deductions are made from our gross salary which is a non-taxable benefit.  Employer Savings Plans offer both a registered and non registered option.  If you work for a publicly traded company this type of plan is often called Employee Share Ownership Plan (or something similar) and offers stock options to employees usually at discounted prices.

For every dollar we contribute from our pay check our employer also matches a percentage which is usually 2:1. This is how it is at my bank.  I contribute 8% of my gross salary, and my employer contributes 4% on my behalf.  It is important to note that if you choose a registered option in this savings plan only your personal contributions are tax deductible. You will not receive any credit for the employer contributions on your behalf.

Pension Plans are an important part of our Total Rewards Package because we are all working towards retirement. In Canada, we have 2 types of pension plans. Defined Benefit Pension Plans are based on Employer Contributions; Employee contributions are optional. The employee does not choose the investment options in a Defined Benefit Pension Plan.  The monthly pension benefit at retirement is guaranteed.  The Defined Benefit Pension Plan is the best option if you plan to remain with your same employer for a long time until retirement.

Defined Contribution Pension Plan is exactly the opposite of the Defined Benefit Plan.  With a Defined Contribution Pension Plan the employee has total control of the investment options, and the only known aspect is the contribution amount.  Both an employee and an employer contribute to this type of Pension Plan.  I contribute 2% of my annual salary, and my employer contributes 6% on my behalf.

How beneficial are your employee benefits?

(Photo By Sfxeric)

Kristina Tahnyak

Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.