Monday, May 15, 2017

Hunched over at a computer? Bent over a bench? Are the long hours of self employed work taking their toll on your back and neck? Need a massage or a chiropractor visit, but it is just too expensive?

What If you could cut the after tax cost of a massage or adjustment by up to 30%?

As a self employed person, Canada Revenue gives you some special tools you can use that regular employee’s can’t. One such tool is the ability to fully deduct the cost of medical and dental expenses against business income. This includes paramedical practitioners like Registered Massage Therapy, Chiropractors, Naturopath, Physiotherapists, Acupuncture etc. Furthermore, these benefits are received by you totally tax free!

The Government wants workers to be healthy, so health care and dental care receive preferential tax treatment when it comes to employee benefit plans. But “I’m not an employee, I am self employed”, I hear you say. Not in the eyes of Canada Revenue. You and your business are two separate entities. And “Your business” can pay for “Your Healthcare” and deduct the whole thing. You receive the benefit as an employee and it is 100% tax free.

Try paying yourself $100 from your company, CRA will tax the snot out of it. But have your business pay for $100 of health care and you get it Scott free!

Now, since this is sanctioned by Canada Revenue Agency, there are, of course, some hoops to jump through.
  1. You can’t just wave a magic wand and declare something is “Health Care” and *Presto* it’s tax free. No, you need to create a Private Health Services Plan (PHSP) a tax sheltering plan sanctioned by CRA.
  2. The PHSP must be managed by a third party, you can’t setup a PHSP and administrate it for yourself. The third party is required by Canada Revenue to ensure the medical expenses are legit, and that if you have arm’s length employees they have an element of privacy.
  3. Unincorporated Sole Proprietors have lower limits than if you have an Incorporated business.
  4. If you have employees, you must give them a “Like Benefit” similar to what you give yourself.

Private Health Services plans are usually administered by Trust Companies, or Insurance Companies. The fees and services vary by provider, but there is often a small one time setup fee, followed by a 10% administration fee whenever you submit a claim.

Even after the small administration fee you can still save 10%-30% in income tax on your healthcare and dental expenses. Furthermore, these dollar do not attract CPP, EI or Worksafe premiums, further increasing your savings.

Speak with your financial advisor or an employee benefits specialist (such as myself) to start your Private Health Services Plan.

Robert Reynolds, Certified Financial Planner, Certified Group Benefits Advisor
Partner - Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614

E.O. & E.

Tuesday, February 2, 2016

2016 Provincial Dental Fee Guide Increases.

Provincial/Territorial Dental Fee Guide Increases for 2016
Suggested Dental Fee Guide Increases for 2016
It’s that time of year when most provincial and territorial dental associations release their annual dental fee guides. Typically, there is an overall increase for dental services provided by general practitioners.
Insurance companies use the information contained in the provincial/territorial fee guides to establish reimbursement levels for the dental services employees receive and to ensure that fees are representative of what the majority of dentists charge.
The following chart outlines the suggested fee guide increases announced for 2016:

Provided via Empire Life.

Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614

E.O. E.

Tuesday, October 20, 2015

Pharmacy Dispensing Fees October 2015

I've updated the list of Dispensing Fees for BC for the month of Oct 2015. This was done in a very unscientific method of calling a bunch of pharmacies from different chains and asking what they charge.

 Pharmacy Dispensing Fees - Oct 2015
 $       9.86
COSTCO (no membership required!)
 $       4.49
LOBLAWS (Real Canadian Superstore)
 $       6.99
 $       8.00
 $       9.60
 $    10.00
 $    10.00
 $    10.00
 $    10.00
 $    11.50
 $    11.50
 $    11.60
 $    11.90
 $    12.60
* Lower dispensing fees often correlate to lower drug costs

A good point to remember is that you DO NOT need to be a Costco member to use their pharmacy. Simply tell the greater that you are using the pharmacy and they will let you right in.

Several Insurance companies have also started Preferred Provider Networks with Costco.
Great West Life will give you an extra 10% reimbursement if you shop at Costco.
Benefits By Design will give you an extra $5 reimbursement if you shop at Costco.

Robert Reynolds, CFP, GBA
Certified Financial Planner, Certified Group Benefits Advisor

Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614

E.O. & E.

Wednesday, March 26, 2014

Using Group Insurance for Uninsurable Business Owners

I provide insurance funded Buy/Sell agreement for clients of mine who own a business with a partner.

Essentially if two (or more) guys own a company, and one of them dies, how does the survivor buy out the rest of the company from the deceased?

Well if the dead guy is married, his wife gets his shares automatically. Does the surviving business owner want to work with the widow? Can the widow replace the dead guy as far as income generation, or jobs that he used to do? No probably not.

Can the surviving partner get a bank loan to buy back the shares immediate after the death of a partner? Is there a new partner than can buy in? Is there some angel investor that will solve the problem? No probably not.

What usually happens is that the surviving owner keeps plugging away at the business on his own as best he can, and slowly, over years, buys back shares from the widow, all the while the widow is entitled to half the profits and dividends from the company.

What they need is a life insurance policy on the lives of each partner designed to pay out to the survivor at the time of death. The survivor uses the insurance proceeds to buy back the shares from the widow. The survivor owns the company outright, and the widow gets her cash.

But what if one of the partners is uninsurable? Some health condition prevents one partner from getting any coverage. That scenario usually kills the whole deal, since only one partner stands to benefit. There is, however, a creative solution we can use to get around this problem. Since the partners own a business, they likely have an Employee Benefits Plan. This plan probably includes some amount of Life Insurance. Furthermore, in the group insurance world, "If you are healthy enough to be at work, you are healthy enough to insure". Because of this attitude everyone is approved, to a point. That point is a No Evidence Maximum (NEM). All carriers use a NEM for Life, AD&D, Disability and Critical Illness. A very small group of only 2 or 3 employees is still guaranteed about $150,000 of Life Insurance, no questions asked. In a larger group of 25 employees this No Evidence Maximum might be $250,000 no questions asked.

By making the beneficiary of the Group Life Insurance the other business partner or the company itself, an insured Buy/Sell agreement can still be implemented. While there are drawbacks to the group insurance method such as limited maximums, annually variable rates, difficulty when changing carriers, possible pre-existing condition exclusions, etc. it is still provides a possible solution where there might have not been one before.

Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614

E.O. E.

Monday, October 1, 2012

Conflict of Interest - Commissions

Life Insurance companies (in Canada) create a huge conflict of interest for their agents. Life Insurance comes in different flavors, Term, Whole Life, Universal Life. Each policy has its pros and cons and price point. Insurance companies pay agent with commissions, and commission rates are different between policies. This causes agents to try and sell inappropriate and too expensive policies to their clients.

Term insurance is what most people need. If you are a family and have a mortgage, you will want cheap term insurance, usually a term 10 or term 20. This will pay off you mortgage and provide income to your family after you die.

Let’s say you have a mortgage for $200,000 you want paid off and want to provide $30,000 of income to your spouse for 10 years. You therefore need about $500,000 of insurance.

Commissions are based off of the first years premiums of the policy you buy. Some agents also get paid a bonus but I won’t get into that here.
  • Term 10 pays 40% of the first years premium as commission
  • Term 20 pays 50% of the first years premium as commission
  • Whole Life and Universal Life usually pay about 70%.

As you might guess the higher commission a policy pays the more expensive it is. Say you are a 40 year old male, non-smoker and want $500,000 of insurance. A term 10 policy should cost $405/y paying 40% commission the agent will make $162

Now the greedy agent will try and sell you a Whole Life or Universal Life which pays 70% but also costs about $5000 per year. Which stands to make them $3500 in commission.  The agent stands to make 20 times the commission if they sell you the more expensive policy. So they push these policies HARD.
Not many people are willing to fork over $400 per month, so what happens is the agent talks them down on the amount of insurance to say $100,000, which costs $1000 per year, which the client can afford. The agent still makes 4 times the commission of the Term Insurance sale, but the client is now drastically underinsured. 

Moral of the story, be sure to know what you are buying and for what reasons. Don't be afraid to get a second opinion. Ask friends or family what kind of insurance they have, and why. Better yet, ask how the agent is getting paid, and ask how much. We legally have to disclose that we are being paid a commission, but nowhere does it require us to state dollars and cents. Ask that question, if your agent gets nervous there might be a reason why.

Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614

E.O. E.

Thursday, June 14, 2012

Real return bond - long term
Govt of Canada - Real Return Bond - Long Term

It is a weird time for Life Insurance company financials. On one hand you have MASSIVE corporate profits

Manulife $1.2 Billion in Q1 2012
Great West Life $451Million in Q1 2012
Sun Life $686 Million in Q1 2012

And yet, insurance companies are all terrified of the current prolonged low interest rate environment.
Manulife just increased their Universal Life and Term 100 rates again, this is the third or fourth time in a year or two. And earlier today RBC Insurance announced that they had just pulled the plug on all of their long term insurance products.

RBC today announced they will suspend sales of:
  • RBC Universal Life
  • Term 100
  • Long Term Care Insurance
  • Critical Illness T100
  • Critical Illness term 75 paid up at 65
  • Critical Illness Return of Premium on surrender riders
  • Quantum Disability Insurance
What do these policies all have in common? A long term horizon of age 65, 75 or 100. 

Why are many companies raising their rates or as RBC has just done pull products from shelves?

Simply because with the current low interest rates they can't make a profit on these long term policies.
The way insurance companies finance these long term policies is they buy long bonds, usually 10-30 year maturities. Since these long bonds are paying so little interest (Govt. of Canada Real Return Long Bond is yielding 0.38% as of June 13, 2012) they need to put aside a lot more capital in reserve to pay out future claims. These higher capital reserve requirements mean they either have to increase rates to consumers, or simply say enough is enough and pull the products with long horizons as they simply can't make money off them.

Short term, insurance companies are posting huge profits, long term the future looks shaky especially if interest rates stay low.

*Edit - I also just got a notice from Industrial Alliance Pacific that they too are increasing rate on July 3 2012.
rates are increasing by 3-10% for long term products such as Universal Life, term 100, Term to 65, Critical Illness and otehr similar long term policies. Something interesting to note, the increase for those age 60+ is only about 3% in most cases, if you are under 60 your increases are 7-10%. Why the difference? Well if you are 60+ you are going to die sooner...  

Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614

E.O. E.

Friday, May 25, 2012

Insurance Journal is a industry magaize that I subscribe too. On occasion they put out internesting comparisons of products or insurance companies.This month they have an interesting comparison of Living Benefits products from various insurer. 

Below you will find a comparison of the Critical Illness coverage provided by insurance companies across Canada. Not all products are created equal. This list shows the different conditions that are covered or not covered as the case may be. 

I have highlighted the products I tend to use in green. You will notice they are the most comprehensive of the bunch.

Click to enlarge

They also had a good comparison of Non-Cancelable (good quality) Disability insurance. Manulife has a couple good DI policies, but they aren't included.  I don't personally use Manulife's DI policies, but only for the reason that I know RBC and Canada Life better and I have not yet found a situation where Manulife is the better option.

Click to enlarge

For very high incomes and very skilled professions, Lawyers, Doctors, white collar business owners etc. I much prefer the RBC Professional contract. The wording is from an older DI policy from decades ago and you can actually read it! a 5 year old could read it and understand it. Most newer policies, not so much. It is my opinion that the RBC Professional policy is probably the strongest policy available today, but it is hard to get and is expensive as you might expect.

For Blue Collar business owners, and employees who want a high quality Disability Insurance plan I like Canada Life as their plan is more customizable and you can mix and match options to make a more affordable plan for those that don't need all the bells and whistles built into the RBC plan.

Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614

E.O. E.