Weighing in on group TFSAs

What plan sponsors need to know
Those offering group TFSAs must follow the CAP Guidelines. From an administrative and governance standpoint, this is an added responsibility—just like adding a new group RRSP or RPP. Current investment, reporting and communications practices can be piggybacked onto an existing group retirement plan if a group TFSA is introduced. This approach can minimize the additional CAP Guidelines responsibilities for the plan sponsor. Reporting is fairly straightforward, as the service provider sends data directly to the Canada Revenue Agency.

In a survey by Leger Marketing in December 2009, 42% of respondents said lack of understanding was the reason why Canadians hadn’t taken advantage of TFSAs. The convenience of payroll deductions makes saving in a group TFSA easier for plan members. Clear communication on how to use the group TFSA, the investments offered, the fees for withdrawals and the importance of continuing to save for long-term retirement goals is a must.

With its flexibility to accommodate withdrawals, a TFSA isn’t for every employer. As with anything new, it’s best to weigh the benefits and implications before taking the leap to offer the TFSA as a permanent group retirement plan choice.

As investor confidence and consumer knowledge increase—and as the market returns to comfortable levels—expect greater member interest in group TFSAs, resulting in a higher number of accounts and growing contributions. BC

Michael Campbell is vice-president, marketing for group retirement services with The Great-West Life Assurance Company.
michael.campbell@gwl.ca

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© Copyright 2010 Rogers Publishing Ltd. This article first appeared in the May 2010 edition of BENEFITS CANADA magazine.