November 2012 Archives

Let me first start by saying, I HATE buying cars.  Not a car guy, never have been, nor will I ever be.     That being said, it was time for the company to get a new vehicle.   I wasn’t sure what I wanted, or where to go, so I did what I only thought sensible. . . . I asked a couple of friends who had just bought vehicles.

A couple of them had used a car broker, who purchased vehicles from the US, but not knowing what I wanted, this seemed a little scary to me.    Another friend told me to go to the local auto mall and just drive vehicles until I found something I liked.   Boy, if you ever want to be ignored, go to a car lot and just look in windows of cars hoping for someone to come and ask you if you need help.  . . what an amazing experience.

And then a friend of mine told me to go see his friends at Brown Bros. Ford.     When I asked him why, he said because they took care of me.   Okay, it was worth a call or at least an email.  

Surprisingly enough, I got a response from the sales manager whom I was referred to within 15 minutes.  We talked on the phone, booked a meeting for the next day and when I showed up, he had a sales guy there to meet me and was already asking me all the right questions.

The long and short of the conversation is that I bought from Mike ([email protected]), not because they had a particular model on the lot, but because they took the time to ask questions, walk me through the options and answer my concerns without a lot of sales hype.

I ended up buying a car for more than I originally planned and purchased the extended warranty to go with it.

WHY?   Because these people practice customer service marketing.    I was handed off from one department to the other seemlessly.   I felt that I was being taken care of and not just another car that needed to be sold that day to make quota.    I was introduced to the service manager and explained how things work there and three days later I had a mailer mailed to me with a thank you note and a rewards card for continued client warranty.

These people realize that they received my business because someone else recommended me to them and that by treating me the same way, I will do the same.

Think of the experience you provide your clients.    What emotions are you creating?   What long term bonds are you forming and are you creating opportunities to develop brand champions?

Brown Bros. Ford does and it will earn them long term, profitable clients.

I am pleased to Get Them Noticed!

Open enrollment for health and other benefit plans is one of the most hectic periods for HR departments. You can’t completely avoid stress, but you can take actions that will help the process go much more smoothly. For calendar year renewals, if you haven’t already, start now! Here are some important steps to reduce your headaches:

1. Engage brokers and providers. Work with your providers. They should help you evaluate alternatives as well as provide informational materials for your employees. Enlist their expertise to help educate employees and, if need be, upper management.

2. Get approvals. Obtain upper management approvals as soon as possible regarding the plans that will be offered and the amount of employer vs. employee contributions. Until you have those approvals it’s difficult to plan properly so make this happen as soon as possible.  Be prepared to make recommendations and provide alternative scenarios and cost comparisons.

3. Forge a plan. Lay out actions to be taken for each benefit plan. Incorporate deadlines and new requirements into your planning and education efforts. This year there are Affordable Care Act (ACA) requirements to provide a Summary of Benefits and Coverage (SBC) to eligible employees at least 30 days prior to the plan renewal date following September 23, 2012 and to reduce the contribution limit to health flexible spending accounts (FSA) to $2,500 in 2013.

4. Communicate, communicate, communicate. Consider various methods to best reach all eligible employees. Email might be fine for office staff but it doesn’t work for employees who don’t use computers. Use a variety of methods to grab attention: email, intranet, posters, payroll stuffers, newsletters, home mailings. Communications should be clear and concise and highlight key information such as meeting dates, forms to use, and deadlines. Try, too, to drive home the point that this information is important to their well-being.

5. Educate, educate, educate. Benefits plans have become ever more complex in recent years and it’s important that employees truly understand the ins-and-outs of how plans work. If you have a high deductible health plan (HDHP) with commensurate health savings accounts (HSA) or health reimbursement arrangements (HRA,) it’s crucial that employees understand the complexities of how to use them legally and properly. Educational meetings should be held at different times to accommodate varying schedules.

Also, do consider hosting evening meetings for spouses as sometimes they are the ones making the benefits decisions. Make sure employees and their families understand such important facets of their health insurance plans as: deductibles, co-pays, coinsurance, preventative care coverage, required pre-approvals and referrals, cost differentials between in-network and out-of-network providers, and different tiers of prescription drug coverage. Their understanding will save you headaches later on! After all, when the insurance company does not cover a cost in the way the employee expected, to whom does (s)he complain?

6. Coordinate with Payroll. Make sure you know when enrollment and other benefits information needs to be provided to your payroll department and that your deadlines and planning reflect that timing. Ensure that 2013 IRS contribution limits are incorporated into the payroll system so the amounts are not exceeded. (To view these limits, click retirement plan limits and health plan limits.) Employees are disappointed when money they thought was deducted pre-tax needs to be taxed. That’s one headache you can prevent!

Health Spending Accounts (HSAs) are the government’s way of helping us to pay for needed health care expenditures beyond what is covered by provincial health plans, they are similar to RRSPs.  

But unlike RRSPs,  most Canadians don't know how to use a HSA and are likely over-paying for their Health Care.

What is an HSA?

A HSA is a special bank account administered by a third party.  Employers deposit funds into the account on behalf of their employees.  Employees then have access to these funds for reimbursement of health care expenditures.  These accounts are available to businesses of all sizes including self-employed individuals.

Similar to RRSPs, Health Spending Accounts are not taxable.  These accounts must be used solely for reimbursement of health care expenses.  Individuals channelling their health care expenditures through an HSA can save thousands of dollars per year.

Comparing RRSPs with HSAs can be helpful.  Both are tax reducing strategies.  HSAs, however, offer more immediate benefits.  HSAs result in tax savings at the time of expenditure without the future tax burden that comes with an RRSP.  In addition, HSAs do not require that funds be set aside for an indefinite period of time.  The purpose of an HSA is to help pay for near term health related expenditures. 

HSA and RRSP Comparisons

Health Spending Accounts (HSAs)

vs.

Registered Retirement Savings Plans (RRSPs)

Top Reasons to  Consider a HSA First

  1. Non-taxable expense/benefit
  2. Immediate benefit
  3. Excess cash not required
  4. Not taxable when withdrawn
  5. No spending limits

RRSPS were introduced in 1957 as a way to encourage Canadians to save for retirement. 

 It wasn’t until 1991, more than  thirty years later, when their use became more widespread as a  result of legislative changes. 

 Similarly, HSAs were created in 1986 when Finance Minister Paul Martin introduced a new way for businesses to offer health benefits to their employees. 

 Until recently the use of HSAs has been limited to those larger companies that have the expertise to understand and properly administer these plans. 

25 years later the technology simplified HSA education and administration to the level that it is now a practical consideration for a wider group of businesses and individuals.

Whereas RRSPs are a tax deferral strategy (that is, taxes are paid on funds at a much later date) HSAs are a tax free benefit. 

When investing in an RRSP, one must have excess funds to set aside until retirement at which time these funds are accessible and taxable. 

On the other hand, an HSA provides a current benefit with no future taxation.  It requires a little advance planning to channel funds normally spent on health related expenses during a calendar year through a Health Spending Account.  This reduces taxable income, and taxes paid, for the current year. 

While an RRSP remains important for retirement planning purposes, a Health Spending Account warrants consideration by any self-employed individual in Canada. 

Furthermore, employers should consider HSAs as part of their employee benefits package.  HSAs provide employees with a non-taxable benefit and complete discretion on use of funds while providing the employer with a greater ability to control corporate expenditures on health benefits.

A Simple Example of Overpayment - Losing $5,000/year.

Health Spending Accounts (HSAs)

vs.

Private Health Care Insurance

Top Reasons to  Consider a HSA First

  1. Non-taxable expense/benefit
  2. Covers more services
  3. Dependents more broadly defined
  4. No dollar limits for specific products/services

Consider the hypothetical situation of Jerry.  Jerry is self-employed (incorporated) and his family consists of a wife and two children. 

His parents are retired. 

Jerry takes medication for high cholesterol and high blood pressure.  He hurt his back a few years ago and requires the services of a chiropractor. 

His wife requires thyroid medication. 

Their combined out of pocket health expenses of $5,000 per year are for items and services not covered by their provincial health plan. 

These items include dental expenses, prescription glasses and contact lenses for three of the four family members, medical lab fees plus other miscellaneous items. 

Jerry’s parents are on a fixed income as are those of his wife. 

Both sets of parents rely on Jerry and his wife to help out with their medical expenses which include various prescriptions, assistive devices and services that total about $11,000 per year.  

Jerry has an Average Tax Rate of about 28%.

This brings Jerry’s out of pocket health care expenditures to about $16,000 per year.

As Jerry and his family age they anticipate that these expenses could increase by 25% or more in the next five years.

Despite having a relatively successful business, Jerry struggles to pay these health care expenses along with all the other costs of home ownership and family.

Jerry should set up a Health Spending Account to cover the above expenses for him and his family.  He is currently over-paying almost $5,000 year because he isn't using an HSA.

A similar scenario plays out with larger companies that want to provide their employees with competitive health benefits.  A Health Spending Account offers additional benefits to these businesses.  It is a tax deductible business expense.  It is also a controllable expense in that only the employer can decide to change the value of this benefit. 

There is no requirement that the amount of benefit be increased on an annual basis nor does the value of this benefit impact on the services available to the employee.  By providing these funds monthly, rather than annually, the employer is better able to control costs by discontinuing payments for those who leave the company.

Who Else Can Benefit?

Health Spending Accounts (HSAs)

Who Benefits the Most?

  1. Self-employed individuals
  2. Employers
  3. Employees receiving employer benefits

For employees, a Health Spending Account is a non-taxable company benefit.  That is, amounts deposited into the account by their employer are not taxable to the employee. 

Furthermore, the employee has complete discretion as to how the funds are used. 

There are no limits on how much money can be spent on specific services.   The only limitation is the amount of money available in the account. 

This is different than the traditional insurance based approach where limits may be imposed on the amount covered for some services.  The employee makes all decisions as to how these funds are utilized.

How Prexia's Technlogy Can Help You Right Now

Technology plays an important role in the growth of Health Spending Accounts.  Similar to how the Internet has transformed how we manage our banking, HSAs can now be managed through your personal computer.  Funds can be deposited directly to your HSA account via credit card or from your bank account.  Claims can be filed online with receipts submitted electronically.  And there is a variety of reports providing access to claims and payments history, deposits, balances and more. 

Over the past 20+ years Canada has put in place the infrastructure and tax incentives to support its model for health insurance coverage.  With utilization of the Internet to provide education, control and administration tools for Health Spending Accounts, Canada is in a position to deal with the pending cost containment of health care expenditures.  This is partially done by utilizing the Internet to help reduce administrative costs that have become a part of the management of services that Canadians utilize for covering their individual health care needs. 

Perry Shoom is Vice President of Marketing for PreAxia Health Care Payment Systems, Inc.  He can be reached via e-mail at [email protected].  For more information on Health Spending Accounts, visit www.PreAxia.com/HSAforBusiness.

Many communities are still feeling the effects of Superstorm Sandy, including power outages and flooding.

The importance of listening to instructions and safety information from your local officials and FEMA cannot be understated.

Federal response teams are already providing assistance to affected communities. SBA is closely coordinating with our federal partners to share information in the immediate aftermath of the storm.

For the latest on the Federal government's response to Sandy, you can read FEMA's blog or follow updates on Twitter.

If you need emergency shelter, you can download the Red Cross Hurricane app, visit the Red Cross web site, or check your local media outlets.

You should also register on the Red Cross Safe and Well website, a secure and easy-to-use online tool that helps families connect during emergencies.

Finally, you can download the FEMA smartphone app or text SHELTER and your Zip Code to 43362 (4FEMA). Standard rates apply

If you're not in an affected area, please consider donating blood, because numerous blood drives have been canceled as a result of the storm. To schedule a blood donation or for more information about giving blood or platelets, visit redcrossblood.org or call 1-800-RED CROSS (1-800-733-2767).

SBA plays an important role in disaster recovery efforts for businesses and homeowners.

As disaster assessments and declarations are made, various SBA disaster recovery loan programs become available to eligible applicants. We will continue to highlight these programs as communities turn to longer-term recovery efforts.

For more information about SBA's disaster assistance programs, visit www.sba.gov/disaster or call our disaster assistance center at 1-800-659-2955.

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This page is an archive of entries from November 2012 listed from newest to oldest.

October 2012 is the previous archive.

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