Saskatchewan begins applying its new six per cent sales tax on insurance premiums on Aug. 1. Will the new tax be a significant cost to employers that will discourage them from offering benefits or is it a small amount that will have little impact on their plans?
Debra Wiegers, benefits consultant and head of the group benefits divisions at Wiegers Financial & Benefits in Saskatoon, opposes the new tax. She also believes, however, that it will lead to positive conversations around plan management and cost control in the long term. “But it’s forcing the hand rather early at a time when our economy is still struggling a little bit with some of our industries,” she says.
The tax, which the provincial government announced as part of its its 2017/2018 budget, will apply to all group benefits plans with life, accident and health insurance policies. The Canadian Life and Health Insurance Association has said the policy “should be immediately reversed,” while the Canadian Taxpayers Federation commissioned a poll that found a 78 per cent of Saskatchewan residents oppose the new tax. Similar policies are already in place in some provinces, however. Ontario, for example, has an eight per cent provincial sales tax on insurance plans.
Read: Saskatchewan tax on insurance premiums ‘not good public policy’
Some large employers are facing thousands of dollars in extra costs, says Wiegers, noting that while they don’t want to offload the extra cost onto their employees, they may not have a choice. “We’re suggesting — and we’re going to be doing it ourselves — whatever payroll deduction they have on the benefits they already pay, they’re just going to add six per cent more to the payroll and then the employer picks up the other six per cent,” she says. “But when you’re dealing with a client who has already gone to, or are coming into, significant increases of premiums at renewal, it’s a double whammy.”
Besides the added burden on employers, Wiegers emphasizes they’ve already helped relieve governments of some health-related costs by purchasing benefits plans for their employees in the first place. “So I think that’s where the frustration lies,” she says.
So what do you think? Do you agree with the Saskatchewan government’s move on taxing benefits or is the added cost an excessive burden on employers? Have your say in this week’s online poll.
Read: Employers urged to prepare for Saskatchewan insurance tax
Last week’s poll, which looked at a new report that suggests Canada will have a $13.4-trillion retirement savings deficit by 2050, asked readers whether the situation is really that bad. Nearly three-quarters (74 per cent) of respondents agreed that people haven’t caught up to the changes to workplace pensions and aren’t saving nearly what they need to for retirement. The remaining 26 per cent of respondents felt the situation isn’t so bad since capital accumulation plans are getting better, governments are making improvements to public pensions and Canadians have access to other sources of wealth and income in retirement.
Read: Canada facing $13.4-trillion retirement savings deficit by 2050
