{"id":481,"date":"2021-07-13T22:55:00","date_gmt":"2021-07-14T05:55:00","guid":{"rendered":"https:\/\/immixgroup.ca\/blog\/?p=481"},"modified":"2022-02-11T12:53:55","modified_gmt":"2022-02-11T20:53:55","slug":"hybrid-traditional-flexible-employee-benefits-a-sample-design-for-smbs","status":"publish","type":"post","link":"https:\/\/immixgroup.ca\/blog\/2021\/07\/13\/hybrid-traditional-flexible-employee-benefits-a-sample-design-for-smbs\/","title":{"rendered":"Hybrid Traditional + Flexible Employee Benefits: A Sample Design for SMBs"},"content":{"rendered":"\t\t
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By\u00a0Howard Cheung, Account Executive, Immix Group: An Employee Benefits Company<\/a><\/p>

\u00a0<\/p>

You are a small or mid-size business. You want affordable employee benefits with costs that you partially control \u2013 while having peace of mind that you can provide for unexpected health\/drug claims. Read on! This article might<\/a> just be the benefits blueprint you’re looking for.<\/p>

In the 2020s, many businesses are being forced to adapt<\/a> how they attract, hire and retain employees. Even for small businesses<\/a>, it is not uncommon to have a five-generation age gap with significantly different health and wellness (a.k.a. personal) needs. The challenge: How to satisfy everyone, while keeping a sustainable budget and maintaining the ability to evolve as you free up cash flow and grow?<\/p>

In this article, I illustrate a sample design that combines the best of two types of benefits:<\/p>

  1. Traditional Insured Benefits:<\/strong>\u00a0coverage for unexpected, catastrophic claims related to health<\/li>
  2. Combined Health and Wellness Spending Accounts (CHWSA):<\/strong>\u00a0cater to modern workforce needs (five-gen age gap) + budget customization.<\/li><\/ol>

    Note that this is not the\u00a0only<\/em>\u00a0way to design benefits to meet modern needs. There is no one-size-fits-all solution, as every group’s needs<\/a>, budget and demographics are different.<\/p>

    Matthew Wong, CGA\/CPA and Co-founder of Purpose CPA,<\/em>\u00a0gives a great high-level overview of the different types and lines of benefits available to SMBs. Matthew helps guide SMBs to navigate the accounting and tax nuances of the different types of benefits, as well as making sure you’re ready for future growth. Read more here:Employee Benefits for Small Businesses \u2014 (purposecpa.ca)<\/strong><\/a><\/blockquote>

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    Traditional Insured Benefits (base plan)<\/strong><\/h2>

    A Traditional Insured Benefits program<\/a> provides a set schedule of coverage for a set premium. Annual renewal adjustment is based on claims experience. Insured benefits have an important role in an overall comprehensive benefits plan<\/a> because they include coverage for catastrophic claims, such as high-cost drugs and out-of-country claims. Including an insured program as the base layer can offerprotection for you and your employees from unforeseen, possibly devastating, health needs. Granted, for some SMBs with limited cash flow a fully insured health and dental<\/a> program may be out of reach. Additionally, a traditional insured program does not include coverage for any personal\/wellness-related expenses.<\/p>

    So, how to implement a benefits program<\/a> that provides for unforeseen health claims and satisfies a wide variety of health\/dental\/wellness needs \u2013 all the while with limited cash flow? One way is to implement an insured program that provides a minimal amount of coverage for life and accidental death and dismemberment (AD&D), and basic health. The gaps can then be offset with a Combined Health and Wellness Spending Account (CHWSA).<\/p>

    The following three steps build a solid-but-basic insured health benefits<\/a> plan:<\/p>

    1. Secure the base-insured benefits program under a broker-managed pool for the most efficient use of your benefits dollar. See our article \u201cValue of Broker-managed Benefits Pool<\/a>\u201d<\/u>\u00a0for a sound long-term benefits strategy.<\/li>
    2. Shift premiums around to minimize \u201cmoney-in, money-out\u201d type benefits. These are benefits that tend to have more predictable claiming patterns and, typically, a cap.<\/li>
    3. Have 80% or lower co-insurance. This helps to reduce premiums while shifting a small amount of expense to the member.<\/li><\/ol>

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      Now to add the CHWSA!<\/strong><\/h2>

      A Combined Health and Wellness Spending Account provides employees with a pre-determined dollar amount of reimbursement for a wide range of expenses outside of their insured benefits<\/a>, or beyond the plan maximums.<\/p>

      A CHWSA offers the element of flexibility, as each employee has control over how they allocate their funds between the two accounts, that is, Health Spending and Wellness Spending. As the employer, this is where you have the ability to control the cost and empower your employees to fit the plan to their needs.<\/p>

      The differences between the two accounts are:<\/p>

      Health Spending Accounts (HSA):\u00a0<\/u>an increasingly popular alternative or top-up to traditional health and dental plans. Only items considered an eligible medical expense by the Canada Revenue Agency (CRA) can be claimed through an HSA. Examples of eligible expenses are medical, dental, vision, diagnostic tests, lab scans and laser eye surgery.<\/p>

      Wellness Spending Accounts (WSA):\u00a0<\/u>extend coverage beyond the traditional type of expenses. Through a WSA, items such as work-from-home expenses, gym memberships, transit passes, yoga classes and even e-bikes can be covered. Employees may even choose to allocate the CHWSA dollars to a group savings<\/a> program, e.g., Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA).<\/p>

      This is how it works, along with a sample blueprint you can follow:<\/p>

      \u00a0<\/p>

      1. Employer decides $X amount for the CHWSA